CAPS

t S cienc es
nag e m e n
Economic and Ma

ea rner’s Book
e 7 L
Grad

J. Bantjes • D. Kerdachi • A. Kriel • K. Mzolo

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EMS Today Grade 7
Learner’s Book

Maskew Miller Longman (Pty) Ltd

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© Maskew Miller Longman (Pty) Ltd 2013

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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 Unit 5 How to recycle and reuse
Unit 1 Traditional societies and goods to satisfy needs
bartering . . . . . . . . . . . . . 2 and wants . . . . . . . . . . . 32
Unit 2 Money and electronic Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
banking . . . . . . . . . . . . . . 5
Unit 3 The role of money . . . . . . 9 Topic 4 Businesses . . . . . . . . . . . . . . . . 35
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Unit 1 Formal and informal
businesses . . . . . . . . . . . . 36
Topic 2 Needs and wants . . . . . . . . . . . 13 Unit 2 Types of businesses in
Unit 1 Types of needs . . . . . . . . 14 the formal and informal
Unit 2 Primary and secondary sector . . . . . . . . . . . . . . . 40
needs . . . . . . . . . . . . . . . 18 Unit 3 The advantages and
Unit 3: Limited resources to disadvantages of formal
satisfy needs and wants 21 and informal businesses 42
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Unit 4 The role of formal and
informal businesses as
Topic 3 Goods and services . . . . . . . . 24 producers and
Unit 1 Goods and services . . . . 25 consumers . . . . . . . . . . . 45
Unit 2 Producers and Unit 5 The effect of natural
consumers . . . . . . . . . . . 27 disasters and health
Unit 3 The role of households epidemics on formal and
as producers and informal businesses . . . . 47
consumers . . . . . . . . . . . 28 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Unit 4 Using goods and services
efficiently and
effectively . . . . . . . . . . . . 30

Term 2
Term 1 Revision . . . . . . . . . . . . . . . . . . . . . . . . 51 Unit 2 Personal Statements of
Net Worth . . . . . . . . . . . 71
Topic 5 Accounting concepts . . . . . . 54 Unit 3 Business income and
Unit 1 Accounting concepts: capital, expenses . . . . . . . . . . . . . 72
assets and liabilities . . . . 55 Unit 4 Savings and investments
Unit 2 Income and expenses . . 57 in business . . . . . . . . . . . 74
Unit 3 Profits and losses . . . . . . 58 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Unit 4 Banking, savings and
budgets . . . . . . . . . . . . . 60 Topic 7 Budgets . . . . . . . . . . . . . . . . . . 77
Unit 5 Financial records and Unit 1 Definition of a budget,
transactions . . . . . . . . . . 62 income and expenditure 78
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Unit 2 Personal budgets . . . . . . 81
Unit 3 Business budgets . . . . . . 84
Topic 6 Income and expenses . . . . . . 65 Unit 4 Savings, buying and
Unit 1 Personal income and planning . . . . . . . . . . . . . 86
expenses . . . . . . . . . . . . . 66 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Term 3
Term 2 Revision . . . . . . . . . . . . . . . . . . . . . . . . 87 Topic 10 Entrepreneurs’ Day . . . . . . . 115
Unit 1 Hosting an Entrepreneurs’
Topic 8 The entrepreneur . . . . . . . . . 90 Day . . . . . . . . . . . . . . . 116
Unit 1 Definition of an Unit 2 Calculating your profit or
entrepreneur . . . . . . . . . 91 loss . . . . . . . . . . . . . . . 122
Unit 2 Characteristics and skills 93 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Unit 3 Entrepreneurial actions . 96
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Topic 11 Inequality and poverty . . . 125
Unit 1 Causes of socio-economic
Topic 9 Starting a business . . . . . . . 100 imbalance . . . . . . . . . . . 126
Unit 1 Needs and wants of Unit 2 Inequality in South
consumers . . . . . . . . . . 101 Africa . . . . . . . . . . . . . . 129
Unit 2 Use of recycled Unit 3 Education and skills to
materials . . . . . . . . . . . 103 fight inequality and
Unit 3 SWOT analysis . . . . . . . 104 injustice . . . . . . . . . . . . 134
Unit 4 Setting and achieving Unit 4 Urban and rural
goals . . . . . . . . . . . . . . . 105 challenges . . . . . . . . . . 136
Unit 5 Advertising . . . . . . . . . . 106 Unit 5 Creating sustainable job
Unit 6 Budgeting for opportunities . . . . . . . . 139
Entrepreneurs’ Day . . . 108 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Unit 7 Costing . . . . . . . . . . . . . 110
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Term 4
Term 3 Revision . . . . . . . . . . . . . . . . . . . . . . . 142 Topic 13 Savings . . . . . . . . . . . . . . . . . . 165
Unit 1 Personal savings . . . . . . 166
Topic 12 The production process . . . 145 Unit 2 Banks . . . . . . . . . . . . . . 168
Unit 1 What is production? . . 146 Unit 3 Community savings
Unit 2 Inputs and outputs . . . 150 schemes . . . . . . . . . . . . 173
Unit 3 Sustainable use of Unit 4 Financial institutions and
resources . . . . . . . . . . . 152 organisations promoting
Unit 4 Meaning of economic entrepreneurship . . . . . 174
growth . . . . . . . . . . . . . 154 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
Unit 5 Productivity . . . . . . . . . 156 Term 4 Revision . . . . . . . . . . . . . . . . . . . . . . . 177
Unit 6 The effect of productivity Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
on economic growth . . 158 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
Unit 7 Technology in the
production process . . . 159
Unit 8 Contribution of technology
to improving productivity
and economic growth . 161
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
Topic 1 History of money

The economy
Topic overview
• Discuss how people trade in traditional • Discuss the development of coins and
societies. paper money.
• Explain bartering. • Explain electronic banking.
• Discuss the development of money. • Explain the role and function of
• Explain promissory notes. money.

1
Topic 1 Unit 1

Unit 1 Traditional societies and bartering

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
key word needed. They had other ways of trading. In this unit you will learn more about
barter – trade how traditional societies traded goods by bartering.
that takes place
without money;
goods and services Traditional societies
are exchanged for
one another
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.

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
key words

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. 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.
2. 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)

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
not been invented yet. Although some people still Markets developed as a place where people could
barter, people don’t often trade in this way anymore. bring their goods to trade with others.

Problems with bartering key word

Bartering is inefficient because, before trade can happen, each person must market – a place
where people
want what the other person has, and must be willing to trade for it. This come together to
makes trading complicated and time consuming. As a result of this problem, buy and sell goods
money was invented to make trade easier.

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. This activity will allow you to experience what life was like in an economy
that did not have money.
2. 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.
3. 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) 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.
d) 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. Think about your experience in Activity 1.2.
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)

4
 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. key word
Money, like fire and the wheel, has been around for a very long time, but as money − any object
you have learned there was a time when money did not exist. No one knows (such as notes or
coins) that can
exactly when money came into existence, although we do know that many be exchanged for
different items have served as money in the past. In this unit you will have the goods or services
opportunity to learn more about how money and banking developed. indirect trade –
trade that occurs
when money is
Money makes it easier used to pay for
goods or services
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. 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 Promissory notes

I, Jane Monroe, do promise to pay City Finance Co. the
A promissory note is a piece of paper on
sum of R50 000. Repayment is to be made in the form of which one person writes a promise to pay
300 equal payments at 6% interest, or R322,15 payable on the other person a certain sum of money at
the 1st of each month, beginning 8/1/2005 until the total some time in the future. It is like an ‘I owe
debt is satisfied. you’ given to someone as a promise to pay
Signed,
them in the future.
Jane Monroe
____________________
The earliest forms of promissory notes
7/1/2005
____________________
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
key word used by Arab merchants between the 10th and 13th centuries. Since then,
promissory note − a they have been used in most economies as a type of money that is issued by
piece of paper on a private individual. The idea of a promissory note developed into what we
which one person
writes a promise
know as paper money today. Promissory notes were the first type of paper
to pay the other money that existed in history.
person a certain
sum of money at
some time in the Coins
future 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
Did you know? Banjarmasin in Indonesia) and Dutch
The first money silver ducatoons. There were also many coins from India in use in South Africa
issued in South (including silver rupees, gold pagodas and mohurs). Other coins in circulation
Africa was called
the rix dollar. included Japanese kobans, English guineas, Portuguese joannes as well as
Russian roubles.

6
 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. You are going to repeat Activity 1.2 using money as a medium of exchange.
2. 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.
3. 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
for people to keep control of their money. people can be paid electronically without going
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 key word
because it reduces the time and resources needed to find a trading partner. medium of
exchange – an
Because trade takes place more easily and time is saved, producers are able
item that is
to spend more time on the actual production of goods and services. When used to make
money is used as a medium of exchange in trade, producers can specialise in trade easier, for
example, notes
what they produce. Specialisation in production leads to greater productivity and coins; money
which in turn leads to the production of a greater quantity of goods and is a medium of
exchange
services. Because a greater quantity of goods and services are available, there is
a higher standard of living.

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. key word
• The item should be durable. Items that break or fall apart and lose their durable – lasts for
a long time and is
form should not be used as money. not easily broken
• The item should be portable. Items that cannot be easily carried around or or used up
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.

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 Is the item Is the item Can the item
relatively durable? portable? be divided
scarce? into smaller
units?
Sand
Shells
Coins
Cheques
Notes

(20)
2. 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

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
key word metallic coins and paper
cheque − a written money.
instruction to a
• Cheques. A cheque is a written
bank ordering
them to pay a instruction to a bank ordering
certain sum of them to pay a certain sum of
money to the Notes changing hands
person named on money to the person named on
the cheque 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

10
 Unit 3 Topic 1

settle debts by transferring money electronically from their bank account key words
into other people’s bank accounts. When payments are made in this way we bank card – a
say that electronic money or digital money is being used. piece of plastic
with particular
• Bank cards. Bank cards can sometimes be
characteristics
used to make payments and purchase goods issued by a bank
and services. Typically two kinds of bank which allows the
holder to make
cards are used to make payments: credit payments and
cards and debit cards. Credit cards are conduct electronic
banking
cards issued by the bank which allow the credit card – a type
holder to borrow money in order to make of bank card
which allows the
payments. Debit cards are cards issued by holder to borrow
the bank which allow the holder to use money in order to
make payments
money that they have already deposited in
debit card – a type
the bank to make payments. Credit and debit cards are of bank card
other forms of money. which allows the
holder to use
Characteristics of bank cards money that they
A bank card is a piece of plastic with particular dimensions (size and shape) have already
deposited in the
and characteristics. Bank cards are used to conduct electronic banking at ATMs bank to make
(automatic teller machines) and make payments. 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
Topic 2 Needs and wants

The economy

Topic overview
• Analyse the basic needs of individuals, • Discuss the unlimited wants of
families, communities and countries. individuals and the problem of scarcity.
• Discuss primary and secondary needs. • Explain why resources are limited.
• Explain how needs are satisfied. • Discuss the economic problem.

13
Topic 2 Unit 1

Unit 1 Types of needs

There are many things that we need in order to stay alive. There are also many
key words
things that we want that we don’t actually need, but they make our lives
need – something
you have to have
better in some way. A need is something you have to have, something you
in order to stay can’t do without. Water and food
alive
are good examples of things that
want – something needs
you would like to satisfy needs. If you do not eat
have but do not and drink you will not be able to
need
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
unit you will learn more about wants
basic needs of individuals, families,
communities and countries. The difference between needs and wants

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. 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)
2. 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?
Why did you put these things on your list? (3)
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

key words
and sometimes they are individuals who have decided to live together. The
households – groups
basic needs of families and households are the same as those of individuals. of individuals
Families need food, water, shelter and security. (such as family
members) who live
together
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
you satisfy by doing this? (3)
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
they be used for? (6)
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) key words
community – a large
group of people
Community needs who live or work
together
A community is a large group of people who live or work together in a collective –
particular place. When people live or work together they have certain belonging to
everyone
collective needs. Examples of these collective community needs are:

15
Topic 2 Unit 1

key words • the need to be protected from criminals

public goods – • the need for education and training
things that the • the need for medical care
government
provides that
• the need for entertainment, sport and recreation.
everyone in the
community uses,
It is the responsibility of local and provincial government to meet the
for example a park
public services collective needs of a community. Community needs and wants are satisfied
– services that by the provision of public goods and services. Examples of public goods and
the government
provides that services are:
everyone in the • street lights • a police force
community needs,
for example water
• roads • buses and trains
and electricity • hospitals • libraries
standard of living You will learn more about public goods and services in the next topic.
– the level
of income,
wealth, comfort, In some communities the standard of living is high because the community
material goods
and necessities is able to satisfy many of its needs. In other communities, where resources
available to a are more limited and not many public goods and services are provided, the
person
standard of living is low.

Activity 2.3 Discuss community needs and how these are

satisfied
1. 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
have changed. (5)
2. 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)

16
 Unit 1 Topic 2

Pictures showing three different communities

3. Where does the government get the money to provide public goods and
services for all citizens? (2)
4. 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
least important (10). (5)
5. 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
Unit 2 Primary and secondary needs
primary needs − In Unit 1 you learned about the basic needs of individuals, families,
our most basic
survival needs, communities and the country. In this unit you will learn more about the
which include our different kinds of needs that individuals have and how these can be classified
need for food and
water (physical
into primary and secondary needs.
needs) and our
need for safety
(security needs)
Primary needs
secondary needs Primary needs are our most basic survival needs. These are the things we have
− needs that to have in order to stay alive. There are two groups of primary needs: physical
develop once
our basic primary needs and security needs.
needs have been
satisfied (for
example, our
Physical needs
social needs and Physical needs are the needs that our bodies have for food, water and sleep.
self-esteem needs)
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 People need to feel safe and secure. Examples of security
water is an example of needs are:
a physical need.
• 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.
The need to feel safe
Physical and security needs are known as primary needs is an example of a
because people usually try to satisfy these needs first. 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
The need to have
Our self-esteem is the way we feel about ourselves. Individuals with a good friends is an example
self-esteem believe that they are capable and worthy people. Individuals with a of a social need.
poor self-esteem do not believe in their abilities and lack confidence. Our self-
esteem 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.

Activity 2.4 Demonstrate understanding of primary and

secondary needs
1. Explain the difference between primary and secondary needs. (4)
2. Copy and complete the following table in your exercise book.
Need What type of need is this? Order of importance
according to your needs The need to achieve
The need to be safe success is an example
of a self-esteem
The need to be loved
need.
The need to be part of a
group
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:

b)
a)
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 key words
wants. However, the resources available to satisfy people’s needs and wants
resources – the
are limited. In this unit you will learn more about how the problem of scarce things we use to
resources results in people having to make decisions about which needs to produce goods
and services
satisfy and what goods and services to produce. scarce – only a small
or limited quantity
Resources are scarce available
non-renewable
All the items that are used to produce goods and services are called resources. resources –
There are many different kinds of resources, including: resources that can
run out and can’t
• land • metals • power be replaced
• supplies • crops • buildings renewable resources
– resources that
• transport • animals • equipment can be replaced
• labour • water • machinery and will never run
out
Can you add other resources to this list?

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. List five limited resources. (5)
2. List four ways in which each of these limited resources is used. (4)
3. Write a paragraph about how we can use each of these limited resources so
that they don’t run out. (4)
4. List as many examples of renewable resources as you can. (5)
5. Can we use any of these renewable resources instead of the limited
resources? Explain. (2)

key words
economic problem
The economic problem
– having unlimited The economic problem which we all face is that
needs and wants we have unlimited needs and wants but limited
but limited
resources to satisfy resources to satisfy them. This problem of scarcity
them is known as the economic problem. Because it is
scarcity – not
enough of
impossible to meet all of our needs and wants, we
something have to choose which ones we will be able to satisfy.
economics – the
study of needs Economics is the study of how people decide which
and how to satisfy
them
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
 Topic 3 Goods and services
The economy

Topic overview
• Describe what goods and services are. • Explain why efficient production of
• List examples of goods and services. goods and services is important.
• Identify who produces goods and services. • Explain why efficient use of goods and
• Identify who consumes goods and services is important.
services. • Explain why effective production of
• Examine the role of the household as a goods and services is important.
producer. • Explain why effective use of goods and
• Explain the role of the household as services is important.
consumer. • Explain how to reuse and recycle goods
in the home.

24
 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 key words
and services. People and businesses need money to buy the things that will goods – things that
we consume
satisfy their needs and wants. An individual or a business that buys goods and
services – work done
services is called a consumer. Another word for goods is products. for the benefit of
another
This topic will look at why goods are made, what services are for sale, and who consume – to use up
or finish
provides and uses goods and services.
consumer – a person
or business that
Everything that people need or want is made by people. For example, a
consumes
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.

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 both a good and a service. When water is Water is a need.
key words
a need, it is a good and when government delivers
government agency
it to your house, it is a service. Water has to be collected, stored and treated – an organisation
before it can be delivered to households for drinking, cooking and washing. like Umgeni
Water, that
supplies water to
Goods the people who
Goods are the things that we can see and touch, like bread or a pair of shoes. live and work in
Durban; or Eskom,
The things (goods) that people need and want are made by: that generates
• people or individuals electricity and
delivers it to
• households the homes and
• companies, by factory workers factories of
Southern Africa
• government agencies.

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. Bring a few old magazines and newspapers to class.
2. Cut out five pictures that show goods that you would purchase that would
satisfy a need or want. (5)
3. Name the good and what need or want is satisfied when you use it. (10)
4. Find three pictures or adverts from the magazine that show a service to
the people of a community. (3)
5. Say what type of service it is. What need or want is satisfied when people
buy and consume these services? (2)

26
 Unit 2 Topic 3

Unit 2 Producers and consumers

Producers and consumers

A producer is the person, household, business or government agency that key word
finds out what people need or want. They will then design and manufacture
producers – people
a product or service to satisfy this need. For example, the development of or organisations
social media, like Facebook, Twitter, Skype and even e-mail, has seen cellular who make or
develop goods
telephone manufacturers improve cell phones. Things that we could only do and/or services
on computers before, can now easily be done on cell phones and tablets.

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 The role of a household as a producer

entrepreneurs – There are people who do not want to work for other people but rather want
people with skills
that start their
to be their own boss. Entrepreneurs such as electricians or architects, who
own businesses start their own businesses, will often start their business from home. This will
operating costs – keep the operating costs down. These people will produce goods: the architect
costs of running a
business 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.
a) List the different types of businesses you see. (2)
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 key words
and services. Water is a basic necessity, so big cities in South Africa like
constitution – all the
Johannesburg, Durban or Cape town gives all families 300 litres of free water laws governing a
per day. This is called the water grant. country
grant – an allowance
1. Study the municipal account for a resident below and answer the which means that
following questions about the water used by this family in one month. no payment is
required
REFERENCE ACCOUNT DETAILS AMOUNT
BALANCE BROUGHT FORWARD 1896.02
PAYMENT – THANK YOU 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 * 1508.73
BASIC WATER AND SEWAGE DISPOSAL ACCOUNT
==========================================
ALL RELATED QUERIES: PHONE 080 13131013
WATER METER 3415376
READING 06JAN 06FEB 4680 4698 18kl * 86.74
300 1/Day*31 Days 9.3kls @ 0.00 = 0.00
> 300 /Day 8.7kls @ 9.97 = 86.74
----------- ----------
Totals 18.0kls 86.74
WATER FIXED CHARGE 06JAN 06FEB * 92.70
DOMESTIC REFUSE REMOVAL - FEBRUARY * 60.67
MONTHLY RATES - FEBRUARY INSTALLMENT 476.17
VAT RAISED ON ITEMS ‘*’ 224.83
DIRECT DEBIT PAYMENT DUE ON 2012-03-15 2469.84

a) January has 31 days. How many free kilolitres of water did this family
get in January? (1)
b) 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)
c) What is the cost of the water per kilolitre charged by this
municipality for the extra water used? (1)
d) What was the total amount of water used by this family in January? (1)
e) What was the cost of this water? (1)
f) What was the total cost for the water used by this family? (1)
g) 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 A business will try to make as much profit as possible, by getting the best price
effectively – for the material that they need to make goods. They will also try to get the
choosing the best best price for the goods they sell. Businesses must be aware that there is a lot
option to get
what you need at of competition for consumers’ money. If they do not buy their materials at the
the best price at best price and keep wastage to a minimum or if they charge too much for the
the right time
efficiently – getting
goods that they sell, the business could fail.
the best results
from what is To keep the business profitable, producers must be effective when they buy the
available with goods and services they need or want. As a consumer, the business must compare
the least possible
waste in time and prices to make sure they get the most for their money. Businesses must efficiently
materials use the goods or services they have paid for as consumers and producers.

30
 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 key words
share in sales, the business’ profitability will depend on how successful these
market share – the
choices were. part of the market
in which you sell
Families can also be consumers or producers, so they can also benefit or suffer your goods and
services
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.

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. Think of three other verbs starting with ‘re’ that can help us
reuse items at home. (3)
2. 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
• There are some things that households
Unit 1 Goods and services
cannot make for themselves and these
• Goods and services are both produced and
things need to be bought when resources
consumed by individuals, households,
allow, for example, a motor car.
companies and government agencies to
satisfy their needs and wants.
Unit 4 Using goods and services
• Goods are things we can touch and use like
bread or a bicycle to satisfy a need or want.
efficiently and effectively
• Services cannot be touched but can help • Efficiency and effectiveness are key
people, for example, a good education can managerial concepts. Whether managing a
help a person get a good job. business, factory or household, we always
have to choose what we will consume. As
Unit 2 Producers and consumers consumer or producer these choices will
• Entrepreneurs and businesses grow when determine whether needs and wants are
they know what people and businesses in successfully satisfied or not.
the country/community need or want.
• They can then design a product or service Unit 5 How to recycle and reuse
to satisfy that need. When this product goods to satisfy needs and
is manufactured and sold the successful wants
organisation is able to make a profit. This
• Needs and wants can be satisfied by reusing
allows the business to grow.
old goods in new ways. This also saves
• When manufacturing these goods and
money by reducing consumption.
services, the business becomes a consumer
• Recycling reduces waste that is usually
of raw materials and services.
dumped in a landfill site and will help
preserve the natural environment.
Unit 3 The role of households as
• There are also many other ‘re’ verbs that
producers and consumers describe how we can be more efficient and
• Like any business or government agency, effective in the way we consume products
the household can be both a producer of and services to satisfy our needs and wants.
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
Topic 4 Businesses

Entrepreneurship
Topic overview
• Differentiate between manufacturing, • Understand what factors determine
trading and service businesses. whether a business is a micro-
• Differentiate between formal and enterprise or a small, medium or large
informal businesses. business.
• Understand where informal businesses • List and explain the advantages and
are located, how they are owned and disadvantages of informal and formal
managed and the type of goods and businesses.
services they trade in. • Explain the role of formal and informal
• Understand why people start informal businesses as producers and consumers.
businesses, who their target market is • Understand and explain the effect of
and what problems they experience. natural disasters and health epidemics
• List some of the rules or regulations that on formal and informal businesses.
formal businesses have to adhere to.

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 South Africa’s economy is divided into two different sectors that function side-
by-side. The one sector is modern and formal and the other sector is informal
sectors – sections or
parts and made up of about two million micro-enterprises. This topic looks at the
informal business different ways in which businesses can be grouped and it focuses on informal
– any business that
is not regulated or and formal businesses.
controlled by the
government
formal business
Informal businesses
– regulated or An informal business is any business that is easily started and simple to
controlled by the run without following the rules that formal businesses adhere to. It does
government in
some way not pay tax and is not monitored in any way by any form of government.
accounting records These businesses do not keep accurate accounting records, and this makes it
– books or records
that are drawn
difficult to calculate how much profit has been made.
up by a business
or person to keep Informal businesses or micro-businesses are usually very small and do not
track of all their usually operate from the same office building or retail space every day. They
transactions and
business deals are mostly found by the sides of roads in the city centre, in suburbs, or rural
tax – a payment areas. They are often managed by the owner, but some have family members
charged by the
who are also involved in working in the business. Some informal businesses
government
to pay for the have one or two paid employees or workers.
provision of goods
and services that Most informal businesses sell their goods and services to customers who
are needed to run
the country
are relatively poor. Informal businesses often sell the same goods as other
rural areas – areas in informal businesses in the area, so they struggle to sell in large quantities.
the country where They normally sell goods with a low mark-up, so their profits are small. A good
people live and
work 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.
(8)
2. What product or service does Nomzamo sell? (2)
3. Who are Nomzamo’s customers? (2)
4. Explain two ways in which Nomzamo’s business has a positive effect on
the local community in which she operates. (2)
5. 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 Formal businesses

trading licence – a A formal business is one that is regulated or controlled by the government
document bought in some way. Formal businesses need to apply for a trading licence from a
from the local
authorities giving local authority and have to be registered to pay tax to the government on any
you the right to profit they make. Because of this, they have to keep records of their business
trade in the area
deals. The business usually operates from a fixed address, in a shop or office,
wholesaler – a
business that buys in towns and cities. If they sell food products, they also have to follow certain
goods in large health rules such as wearing gloves when handling food so that no germs are
quantities from
manufacturers passed on to the customers.
and then sells the
goods to other A formal business can be very small, small, medium or large.
shops or customers
in smaller
quantities
municipal rates
Case study: Ram’s formal business
– taxes or levies
charged by towns Ram owns a wholesaler in Bela Bela. He sells food and soft drinks, cleaning
or cities to pay materials, household items, furniture, tools and equipment. His business
for the provision
of services like
is a formal business. He has been operating from the same shop for ten
rubbish removal years. As a property owner, he has to pay municipal rates for the supply of
VAT vendor – electricity, water, street lights and rubbish removal. The rates also pay for
registered to
charge customers the wages of the people who manage and run the city.
VAT which is
paid over to the Ram employs 26 people. He has registered for tax and is also a VAT vendor
government
which means he has to charge customers VAT which he pays over to the
VAT – tax paid on the
goods and services government.
that you buy
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.

38
 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 micro-enterprise
very small business like Nomzamo’s. It normally employs less than five people – a very small
informal business
and operates in the local community. employing less
than five people
A small business usually employs between 5 and 50 people and is usually small business –
owner-managed. They are mainly formal businesses that trade locally. These employs between
5 and 50 people
businesses make up most of the established businesses in South Africa and enterprise – another
include enterprises like a hairdressing salon, a small shop or a restaurant. name for a
business
Medium-sized businesses are formal businesses that employ up to 200 people medium-sized
business – employs
and are usually run by a manager. Although most of these businesses trade up to 200 people
locally, they can also have regional or national branches and sell to customers SMME – an
all over the country. abbreviation for
small, medium and
micro-enterprises
Small, medium and micro-enterprises are called SMMEs.
large business – a
business that
Large businesses are usually owned by a large number of people who have employs more
bought shares in the business. These businesses employ hundreds of workers and than 200 people
they buy and sell products and services on a large scale. They often have offices shares – equal parts
of a business that
and branches in more than one city or country. Examples include banks, large can be bought by
retailers (shops), clothing and furniture manufacturers and mining companies. 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

• Manufacturing businesses are involved in making or producing goods.
key words
They take raw materials and change them into a semi-finished or finished
manufacturing
business –
product that they sell at a profit. Examples include a flour mill, a bakery or
involved in making a clothing or toy factory.
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, A bakery
that sells alcohol
• 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

(6)
2. Explain, in your own words, how a manufacturer makes a profit. (2)
3. 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 They provide a limited range of goods and
services to people throughout the country. services, mainly to the local community to
satisfy customers’ basic needs at low prices.
They employ large numbers of workers on a They employ very few workers and the
permanent basis. owner is often the entrepreneur and the
only worker.
They often provide opportunities for their Owners and workers are usually not well
workers to be promoted to better jobs and to educated or skilled.
learn new skills.
They help other people, businesses and the Very little capital is invested in the business
government to earn money because they and generally the businesses do not own or
borrow capital, pay wages, rent and taxes and rent the land they trade from.
buy goods and services from other people,
businesses and the government.
As consumers
Formal businesses do not often buy goods Informal businesses are consumers of
and services from informal businesses. They formal businesses as they buy most of their
buy goods and services from other formal products from formal businesses.
businesses (e.g. stock and advertising) and
from the government (water and electricity).

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 key word
businesses. A disaster or epidemic could obviously affect the local economy epidemic − a large
number of people
negatively because capital goods and infrastructure could be destroyed falling sick with
and supplies (such as medicine) could be lost or run out. There could be the same disease
at the same time
no production of goods and services until businesses start functioning and in a particular
producing again leading to an increase in local prices of goods and services. 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. 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)
2. Explain the effect the flood will have on Cibongile’s mother’s business. (2)
3. Explain the changes that Tobogo might experience in his everyday
lifestyle in the next two weeks. (2)
4. Explain the effect the flood will have on the future of the furniture
business that Tobogo manages. (2)

key word
The effect of natural disasters
compensation –
money that is paid If a natural disaster, like a flood, fire, earthquake or violent storm, were to hit
out after a loss has a business area and destroy all or part of a business’ stock or its buildings, it
been suffered
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 It would not be insured against the disaster and would not
be able to claim back some money to cover what was be able to claim for any losses. If the area was declared
lost, but they would still suffer some financial loss. Their a disaster area, they might be able to get some form of
insurance costs might also increase in future. compensation from government to help them out.
It would probably not be able to trade until the building If they have money saved, they could get back to business
had been fixed and the shelves had been restocked. It by setting up a make-shift stall on the side of the road.
would lose sales during this period.
Their employees could temporarily lose their jobs, Because they do not carry a lot of stock, they might be
especially if they were casual workers. 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 If they do not have any money saved to buy new stock,
from other businesses that were not affected by the they will no longer be able to trade. This means the
disaster and the business would need to win back these owner, and any workers, will be left without an income.
customers. 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 The owner and employees are unlikely to have medical
will pay towards their medical expenses. aid cover which means they will have to bear the
medical costs themselves.
Employees of formal businesses are usually covered by People who work in informal businesses are usually
the Unemployment Insurance Fund (UIF) to which they not registered for UIF.
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.

49
 Summary

Unit 1 Formal and informal Unit 4 The role of formal and

businesses informal businesses as
• An informal business is usually a very small producers and consumers
or micro-business that is easily started and • Informal businesses provide a limited range
simply run without needing to follow any of goods and services at low prices, mainly
rules. It is not taxed or monitored in any to their local community, employing very
way by any form of government and it does few workers.
not keep accurate accounting records. • Informal businesses are consumers of
• A formal business is one that is regulated or formal businesses as they buy most of their
controlled by the government in some way. products from formal businesses.
It pays tax and has to keep records of its • Formal businesses provide a large number
business deals. of goods and services to people throughout
the country and they employ large
Unit 2 Types of businesses in the numbers of workers on a permanent basis.
formal and informal sector
Unit 5 The effect of natural
• Most economies are divided into two
different sectors, the formal and the
disasters and health
informal sector. epidemics on formal and
• Businesses can be divided into three different informal businesses
types: manufacturing, trading or service. • Formal businesses are normally insured
against natural disasters and health
Unit 3 The advantages and epidemics while informal businesses are
disadvantages of formal not.
and informal businesses • Informal traders can often quickly get back
to business after disaster strikes by putting
• Informal businesses are easy to form and
up a make-shift stall on the side of the road
provide employment opportunities for
with whatever stock they have left or can
people who struggle to find employment in
buy.
the formal sector.
• If informal businesses lose everything in a
• Because informal businesses do not pay taxes,
disaster, they will no longer be able to trade
the government does not get any money
and both the owner and any workers will
from them to put towards the provision of
be without an income.
goods and services in the economy.
• If the owner of a formal business is unable
• Formal businesses employ more people at
to work as a result of bad health, other
higher wages than informal businesses.
employees in the business can take over the
• Formal businesses and their employees are
job while an informal business will have to
taxed and the government uses this money
close down if its owner is sick.
to upgrade the country’s infrastructure,
for example, building roads and providing
electricity.

50
Term 1 Revision

Topic 1 History of money

1. Describe how a barter economy functions. (8)
2. Discuss the various items that have been used for money throughout
history. (8)
3. Describe the role played by banks in the economy. (8)
4. What characteristics make an item useful as money? (8)
5. Are credit cards a form of money? Explain your answer. (8)
6. 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. Use examples to explain the difference between needs and wants. (8)
2. Define each of the following terms:
a) Community
b) Renewable resource
c) Non-renewable resource (12)
3. Explain, using examples from your own community, what is meant by
public goods and services. (6)
4. Draw a picture to illustrate how individual needs and wants can be
classified. (8)
5. Explain in one sentence what is meant by the economic problem. (6)
Total [40]

Topic 3 Goods and services

1. Choose the most suitable match. Write down only the number and the
letter.
A B
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 G Taking a used product, breaking it down into its basic parts
agency and then remaking it into a similar product – like old paper
to cardboard

51
 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)
2. a) Name one government agency that you know of. (1)
b) Briefly describe what product or service this agency is responsible
for providing to South African communities. (2)
3. 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
the one you consumed in (a). (1)
d) Do you think you made the right choice? (1)
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
effective. (2)
4. 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.
A B
1. An advantage of an A A business that makes a profit from buying and
informal business 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

52
 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 H A term given to small, medium and micro-
business businesses
9. A disadvantage of an I A business that makes a profit by selling goods
informal business that it has made
10. A characteristic of an J A business that has registered for tax and keeps
informal business accurate accounting records

(10)
2. Indicate whether the following statements are True or False by ticking the
correct answer.
True False
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.

(10)
3. Write a paragraph explaining the effect a natural disaster, like a flood,
will have on a formal business. (5)
Total [25]

53
 Topic 5 Accounting concepts
Financial literacy

Topic overview
• Explain different accounting concepts: • Discuss the role of savings, budgets and
° Capital banking.
° Assets • Explain the importance and role of
° Liabilities keeping financial records.
° Income • Understand different types of
° Expenses transactions.
° Profit
° Losses.

54
 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 finances – money or
us to understand where or how the money of the business has been spent and funds
capital – what the
where money has come from. This information needs to be presented in a owner puts into
particular way that makes it easy for the owner to see what has happened to their business
assets – possessions
the finances of the business.
that are used to
run a business
What is capital?
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
A hairdressing business has many assets
number of different assets and the list that follows gives a few including hairdriers, basins, chairs and the
examples: 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 What are liabilities?
of the business
Liabilities are the debts of a business. Liabilities can be loans, where the
loan – money
borrowed from business has borrowed money from a bank or another person. They can also
a financial be amounts of money owed to suppliers, where the business has bought
institution such as
a bank goods from a shop on account (credit) and still owes the supplier money. The
suppliers – business will pay its suppliers at a later stage.
businesses that
a business buys Business owners may not have enough of their own money saved to start a
items from
credit – buy now and business. Therefore the owner may have to borrow money from a bank. This
pay later means that the owner has to take out a loan. The disadvantage of borrowing
interest – money
money is that it has to be paid back to the bank with interest.
earned on the
money you save
with a bank
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 goods − products
be earned by: that businesses
sell, for example,
• selling products to customers, such as a shop selling bread. food and clothing
• providing a service to clients, such as a hairdresser cutting hair. services − services
are provided to
• renting property to other people, for example renting a house out to a family. customers for
• putting money into a bank account where it earns interest. a fee. They are
the non-tangible
The correct accounting terms for the income earned above, would be: products where
a skill is used to
• Sales – income from selling goods meet a customer’s
• Income from providing services, for example, cutting hair need. Examples of
service businesses
• Rent income – income from renting property are lawyers,
• Interest income – income given by banks or financial institutions. doctors and
painters
income – money
What are expenses? earned by the
Expenses are the costs of running the business. There are many different business
expenses – running
expenses that businesses and people have. However, businesses may have costs of the
different expenses depending on the type of business they do. For example, a business
hairdresser may have different expenses to an accounting business.

Examples of expenses that a hairdresser may have:

• Water and electricity • Products • Advertising
• Stationery • Wages

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.
Example of expenses
• He has received R50 000 for selling kit that cost him R20 000 to buy. of a hairdresser
• 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. (3)
2. Calculate his total income for the month. (2)
3. Calculate his total expenses for the month. (2)
4. Make a list of eight items that would be included as other expenses
for the month. (8)

57
Topic 5 Unit 3

Unit 3 Profits and losses

What is a profit?
key words Profit is the reason why people start businesses. It is the amount of money
profit – the amount left over after all the expenses have been paid. Profit can be used to measure
by which income whether the business is successful. A profit is made when the income of the
is greater than
expenditure business is more than its expenses. Profit is calculated as follows:
loss – the amount by
which expenditure Income – Expenses = Profit
is greater than
income
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. Solution
He wants to know whether he has made a Income
profit or a loss for the month of May. He Plumbing jobs 34 500
gives you the following information: Rent income 3 450
• Money received for plumbing jobs TOTAL INCOME 37 950
– R34 500 Expenses
• Money received for rent – R 3 450 Materials 12 450
• Money paid for materials needed to Wages 3 200
provide the service – R 12 450 Advertising 600
• Money paid for wages – R3 200 Vehicle expenses 2 130
• Money paid for advertising – R600 Stationery 500
• Money paid for equipment* – R5 000 Interest on loan 270
• Money to pay back loan** – R 2 000 TOTAL EXPENSES 19 150
• Money paid for motor expenses – PROFIT (Income – expenses) 18 800
R 2 130
*Equipment is an asset not an expense.
• Money paid for stationery – R 500
**Loans are liabilities not expenses. However,
• Money paid for interest on loan – the interest payable on the loan is an expense
R 270 because it is the cost of borrowing money.

58
 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 45 000 Stationery 500
services
Water and electricity 2 000 Vehicles 55 000
Equipment 30 000 Wages 13 500

1. Identify the three assets that Blake has in his building business. (3)
2. Calculate the total value of these assets. (2)
3. Make a list and calculate the liabilities of Blake’s Builders. (2)
4. Name two income accounts. (2)
5. Calculate the total income that the business has earned. (1)
6. Make a list of the expenses and calculate the total expenses. (6)
7. Did Blake’s Builders make a profit or a loss? Show the calculation to
support your answer. (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 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
deposit −put money
into the bank for their business by cheque. However, cheque fraud has become a big problem
account and now many businesses prefer to use the internet to do their payments and
withdraw − take
money out the banking.
bank account
current account In school accounting, however, we assume that businesses use a cheque
– a bank account account and that most of the payments are made by cheque. This kind of
used for daily
transactions, also account is called a current account.
called a cheque
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. 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
bank account? (2)
2. 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 CCYY- Transaction Description/Narrative Payments Deposits Balance
MM-DD
2015-06-01 Statement Opening Balance R 15 000.00
2015-06-21 Internet payment R 350.00- R 14 650.00
2015-06-25 Deposit R 850.00 R 15 500.00
2015-06-25 Bank charges R 2.00 R 15 498.00
2015-06-26 Deposit R 500.00 R 15 998.00
2015-06-27 Deposit R 662.00 R 16 620.00
2015-06-28 Payment R 425.00 R 17 045.00
2015-06-29 Cheque payment R 635. 00 R 16 410.00
2015-06-30 Bank charges R 10.00 R 16 400.00
2015-06-30 ATM withdrawal R 120.00 R 16 280.00
Closing Balance R 16 280.00

60
 Unit 4 Topic 5

3. Explain why the balance of the bank account increases or decreases when
there is a:
a) deposit
b) bank charges
c) cheque payment. (3)
4. Name three advantages of using internet payment. (3)
5. 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. key words

There are different source documents to record the different transactions that transaction – a
business deal
can take place in a business. The bookkeeper records the transactions so that
source document
the owner can use the information to make decisions about how to run the – a record of a
business. transaction that
took place in the
Received rent from business
Money paid for
the nail lady – receipt
shampoos – cheques

Paid the water and

Interest earned on
electricity bill –
money in the bank –
internet transfer
bank statement

Paid the salary of the

Money received from
other hairdresser –
customers – till slip
cheque

Examples of transactions in a business

Activity 5.5 Explain transactions and the importance of

financial records
1. 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)
2. Give two reasons why it is important to make sure that the records of the
business are accurate and up to date. (2)
3. 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: Unit 4 Banking, savings and

capital, assets and budgets
liabilities • Every business should open a bank account
• Capital is money, assets or both put into in the name of the business.
the business by the owner. • There are different kinds of bank accounts:
• Assets are the possessions of the business. ° current account (also called cheque
• Liabilities are the debts, for example, account)
money the business owes to suppliers, the ° savings account (notice deposit, call
bank or other people. deposit, fixed deposit).
• Businesses can save when there is money
Unit 2 Income and expenses left over after all the costs have been paid.
• Income is the money a business earns. • Budgets are a plan for the future to see how
• Income can be earned by: much money is likely to be received and
° selling products paid out.
° providing a service
° letting property Unit 5 Financial records and
° saving money in an account that earns transactions
interest.
• Financial records are used to keep track of
• Expenses are the running costs of a
the business transactions so that the owner
business.
can make good financial decisions about
• Examples of expenses are water and
the business.
electricity, wages, products and advertising.
• A bookkeeper usually records the
transactions.
Unit 3 Profit and losses
• Transactions are the business deals that
• Profit = Income – Expenses
take place every day.
• If your income is greater than your
• There are many different kinds of
expenses, you make a profit.
transactions, for example, buying stock,
• If your income is less than your expenses,
selling stock, and paying accounts or wages.
you make a loss.

64
Topic 6 Income and expenses

Financial literacy
n gs
Savi

Interest on loans
Sala
ry

e ctricity
nd e l
r a
Wate Telepho
n e
t
Ren

Topic overview
• Identify different types of personal • Name the types of business expenses.
income and personal expenses. • Explain the difference between savings
• Prepare a Statement of Net Worth. and investments.
• Name the types of income received by
businesses.

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 Are paid daily or weekly
on the 25th
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 key words

When you save money in certain types of bank accounts you earn income called per annum – per
year
interest. The interest you earn is a percentage of the amount you invest, for
interest rate – the
example, 12% p.a. where p.a. stands for per annum which means per year. So percentage of
you will be earning 12% more than you invested in one year. This percentage is interest you earn
on your savings
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.

Activity 6.1 Investigate the interest rate of three banks

1. Choose three different banks.
2. Investigate the interest rate that would be offered by the three different
banks on R20 000 deposited into a fixed deposit for 24 months.
3. Write the answers down and compare the answers with the other banks
investigated by other members of the class. (3)

Rent from property key words

Property is the term for buildings, homes, offices or land. People buy property to: property − buildings,
• live in homes, offices or
land
• work in
tenant – someone
• let (rent out). who rents a
building, house
People who rent property are called tenants. The tenants pay rent to the or flat
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.

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. In your own words, briefly describe four different ways in which personal
income can be earned. (4)
2. What is the difference between a salary and a wage? (4)
3. 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) How much rent does the owner want? (1)

b) Who would you suggest this home is most suitable for? (1)
c) Why would people choose to rent rather than buy a house? (2)
d) Give two reasons why people who own a house would prefer to rent
it out rather than living there themselves. (2)

68
 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 key words
and have some money left over each month that can be saved for emergencies budget – a money
plan to make sure
and that can earn some interest. It may be useful to draw up a personal budget you do not spend
to make sure that you are not spending more than you earn. more than you
earn
insurance – an
Activity 6.3 Calculate personal expenses agreement
whereby a
1. In this activity you are going to find out the costs of the items in the company agrees
to pay for loss of
table below. You can find this information on the internet, in adverts in
or damage to your
newspapers or magazines or go to a few shops. Copy the table below and property in return
fill in the information you find. for a monthly fee
(there are terms
Item Cost and conditions
that apply to the
Cost of a cell phone contract per month 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)

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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 R1 340
Entertainment R1 230 Clothing R400
Extramural expenses R780 General expenses R500
Interest on savings account R560 Groceries R7 500
Money from computer business R23 000 Telephone costs R770
Rent from flat R2 500 Transport and petrol costs R2 500
Rent paid R6 700 Insurance R600
School fees R3 500 Medical costs R1 600
Water and electricity R1 450 Bank charges R150

a) Calculate the Kara family’s total income for March. (5)

b) Calculate the Kara family’s total expenses for March. (14)
c) Have the Kara family got enough income to cover their expenses?
Show a calculation to support your answer. (2)
d) Name three other possible expenses of the family that are not listed
in the table. (3)
e) In your opinion, explain whether there are any expenses that could be
• increased
• decreased
• removed. (3)
f) How can the Kara family increase their monthly income? (1)

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 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.
key word
To calculate how wealthy you are, you can draw up a statement of your net
Statement of Net
worth. A Statement of Net Worth is simply a list of all your assets (your
Worth – a list
possessions) and liabilities (your debts). of assets and
liabilities
Net worth is calculated using the following formula:
Possessions (assets) – Debts (liabilities) = Net Worth

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 Rachel Gilks Statement of Net Worth for June
ASSETS
information for June and wants you to prepare
Cell phone 1 500
her Statement of Net Worth. Money in the bank 4 700
Car 130 000
Cell phone – R1 500, Loan from the bank – Furniture 46 500
R20 000, Money in the bank – R4 700, Credit TOTAL POSSESIONS 182 700
card – R1 350, Account at clothing shop – DEBTS
R 650, Car – R130 000, Furniture – R46 500. Loan from bank 20 000
Credit card 1 350
Clothing account 650
TOTAL DEBT (22 000)
NET WORTH (ASSETS – DEBTS) 160 700

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,
Computer – R12 400, Loan to uncle – R2 000 (17)

71
Topic 6 Unit 3

Unit 3 Business income and expenses

key words Types of income that businesses receive

income – money Some of the types of income that individuals receive can also be received by
earned by a a business, for example, rent and interest. Income is the money a business
business or person
earns through selling goods, by offering a service or by investing money. The
expenses – costs
that a person or following list gives examples of ways in which a business earns income:
a business has to • selling goods/products
pay either in order
to satisfy their • renting out extra office space
needs or to run • earning interest on money invested in a bank account or other form of
their business
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:
• renting out extra office space Rent income
• earning interest on money Interest income
• selling goods/products Sales income
• providing a service Current income
• earning commission Commission income

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:

• the cost of the goods sold Cost of sales
• the cost of promoting Advertising
• the cost of employing people Salaries and wages
• the cost of administration Stationery and printing
• the cost of the material Service material
• the cost of delivering Delivery expenses
• the cost of borrowing money Interest on loan
• the cost of telephone calls Telephone
• the cost of business premises Rent expense

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.

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 Unit 3 Topic 6

key word
annual – yearly
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.

Activity 6.5 Calculate business income and expenses

1. Define what income and expenses are. Use examples to explain your
answer. (4)
2. Identify the correct accounting name for the following transactions:
• Money received from services
• Bought envelopes
• Paid for an advert in the paper
• Received interest from the bank. (4)
3. 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? (2)
b) How much income did she make from selling shampoo? (2)
c) Give Alex four suggestions on how she can increase her profit. (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 Just like individuals, businesses can save their spare money in different kinds
spare – extra 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 32 Day notice Fixed deposit
account account 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)

key word
Different types of investments investing – taking
Saving money in a bank and earning interest on this money is a form of money that you
have saved and
investment. However, there are also other ways in which to invest money to doing something
make it grow. You can: with it to make
more money
• 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.

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
Topic 7 Budgets

Topic overview Financial literacy

• Understand what a budget is and how • Understand what expenses and

it is used to plan and control income payments are.
and expenditure. • Analyse a personal and a business
• Learn what information is shown in a budget.
budget. • Understand how a budget can be used
• Understand what income and receipts to plan for future buying, saving and
are. investing.

77
Topic 7 Unit 1

Unit 1 Definition of a budget, income and

expenditure

key words 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 – a table
or spreadsheet budget to plan and control their income and expenses. A budget will help you
that shows the to avoid wasting money and help you save and invest money for the future.
amounts of
expected income
and expenditure What is a budget?
for a month for
a business or The word ‘budget’ comes from an old French word bougette, which was a small
individual 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?

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
A French lady carrying a small
leather bag, called a bougette. 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
A list of the expected
Income/Receipts of cash 350 money to be received
Pocket money 50 and a total is calculated

Birthday present -
Money for working in the garden 300

Expenses/Cash payments 335 A list of all the expected money that

Books and magazines 40 needs to be paid during the month
and a total is calculated
Clothes 200
Entertainment 60
Total amount received minus total
Food and cool drinks 35 amount paid

Money in the bank account at beginning of

Surplus for the month 15 the month
Money at the beginning of month 220
Money expected to be in the bank account
Money at the end of month 235
at the end of January

1. How much money did Tosin have at the beginning of January? (1) key word
2. How much money did he have at the end of January? (1) surplus – when you
have money left
3. Explain why his money went up by R15 during January. (1) over after you
4. Draw up your own budget and show your: have paid all your
expenses
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. (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
entertainment. Payments
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
The budget should show whether there is a difference between your expected
deficit – the extra
amount of money expenses and income. If you will get more money than you spend, it is called
you need when a surplus; if you get less money it is called a deficit. Tosin had a surplus in
your expenses are
more than your January so fortunately he had money left over from January that he could use
income in February.

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 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
Did you know?
When people use
(savings) available for these expenses.
a budget to plan
• They have no plan or budget, so they spend their money until it runs out how to spend and
and then have no money left to last them to the end of the month. save their money,
they have fewer
Learn how to draw up a budget and make it a part of your life. This will not problems paying
only help you manage your money better, it will also help you to plan ways in their debts, bills
and credit cards on
which you can save and invest money for the future.
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
• food and drinks R200 • iPod R400 • camera R200
• radio/cd player R200 • save R ?
• 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. How much money did they have at the beginning of February? (1)
2. Explain why there is a rent expense and a rent income amount. (2)
3. Why did the family have a surplus of R770 for February? (2)
4. 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)
5. How do you know that they buy some goods on credit/account every
month? (1)
6. 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 budget can be drawn up by anyone in the

A business budget
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 400 000
Money earned from delivering stock to customers 8 000

Payments of cash ?
Stock bought 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 101 050
Money at the end of month ?

Information:
• They are expecting sales to double from November to December.

1. Give two reasons why you think their sales will go up in December. (2)
2. Why do you think they are planning to increase their wages in
December? (2)
3. a) Calculate whether the business expects to have a surplus or a deficit
for the month. (2)
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.

If, however, people planned their expenditure better by drawing up budgets,

key word they might find that they could afford to save more. In fact, the first thing you
expenditure – the should put in your budget is an amount you want to save. Then you complete
money you spend
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. Explain whether you save any of your money, and if not, why not. (2)
2. Explain why you think it is important to try and save some of your money. (2)

Summary
Unit 1 Definition of a budget, Unit 3 Business budgets
income and expenditure • A business budget is a budget drawn up
to plan the income and expenses of a
• A budget is drawn up to show the
business.
amounts that a person or business
expects its income and expenses to be
Unit 4 Savings, buying and
every month for a certain period of time.
• Income is any money earned.
planning
• Expenses are costs that a person or • If people planned their expenditure by
business has to pay to either satisfy their drawing up budgets, they might find
needs or to run their business. that they could afford to save more.
• The first thing you should put in your
Unit 2 Personal budgets budget is an amount you want to save.
• A personal budget is a budget drawn up Then you complete the budget, planning
to plan the income and expenses of an only to spend the remaining amount.
individual or a family.
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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. Explain the meaning of the following:

a) Transaction
b) Savings
c) Loss. (6)
3. 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. 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
b) Advertising e) Petrol
c) Interest on loan f) Service material (6)
3. Define the following words:
a) Commission income c) Investments
b) Savings d) Interest rate (8)
4. 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 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)
d) Discuss two ways in which Jordi can improve her net worth. (4)
5. What does the term ‘savings’ mean? (2)
6. What are the advantages of saving some of your income each month? (2)
7. Explain what interest is. (2)
8. Explain why a fixed deposit account is a better form of investment than
a savings account. (4)
9. Explain how savings and investments make money available to start new
businesses. (3)
Total [45]

88
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.

JANUARY
Income/Receipts of cash (310)
Allowance 200
Money for cleaning the house 50
Money for working in the garden 45

Expenses/Payments of cash (305)

Snack foods 30
Magazines 20
Clothes 125
Stationery 80
Savings 50

Surplus for the month 5

Money at the beginning of month -
Money at the end of month 5

1. What is a budget and why is it important to have one? (5)

2. What type of information is shown in a budget? (3)
3. What kind of budget has Thabiso drawn up? (2)
4. Why did Thabiso have no money at the beginning of the month? (5)
5. How does Thabiso earn income to pay for his expenses? (3)
6. How many times did Thabiso mow the lawn in January? (2)
7. How much could Thabiso earn if he mowed the lawn every week? (2)
Total [22]

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 Topic 8 The entrepreneur
Entrepreneurship

Topic overview
• Understand what an entrepreneur is. • Investigate the entrepreneurial actions
• List the characteristics of an of buying, selling, producing and
entrepreneur. making a profit.
• Discuss entrepreneurial skills.

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 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.
Entrepreneurs invest money to
What does it take to be an entrepreneur? start their own businesses.
It takes certain skills and personal characteristics to be a successful key words
entrepreneur. Not everyone is cut out to be an entrepreneur. For
entrepreneur − a person who
example, an entrepreneur has to be able to live with uncertainty owns and runs their own
and be comfortable taking risks. Some people are more comfortable business, assumes all the risks
and rewards for the business
working for other people. They enjoy the security of earning a regular venture, and has the skills and
income at the end of every month. knowledge to combine the
other factors of production
to produce a useful good or
Activity 8.1 What is an entrepreneur? service which can be sold at a
profit to consumers
1. Explain in your own words what an entrepreneur is. (1) calculated risk – making a
decision even though you
2. Look at the picture of the entrepreneur on the opener page of know there is a risk involved
this topic. Identify whether this entrepreneur is selling a service
or selling goods. (1)
3. Do you think you would enjoy being an entrepreneur? Give
reasons for your answer. (2)

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
new businesses. Another strategy is to stimulate the economy by Entrepreneurs help to reduce
encouraging existing businesses to expand. unemployment by creating jobs
for other people.

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Topic 8 Unit 1

Why do people become entrepreneurs?

We had 273 applicants for I work so hard but the I did matric three years ago.
the last job we advertised in company gets all the I’ve been looking for work
the newspaper! money! since then. I’ve had no luck
finding anything to do.

I would like to become an

I didn’t have the chance to go I don’t like other people
entrepreneur because I’m very
to university. It’s hard to get a telling me what to do. I
frustrated. My job’s so boring
job without any qualifications. want to be my own boss.
and the pay is low.

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:

After years of unemployment it feels

Starting my own business good to be busy and to be able to plan
I didn’t know I could
was really hard but I for the future.
do it! I’m much more
learnt so much.
confident now!

I work hard but at least I’m in control of

I – not my boss – gets the my own life – it’s
financial rewards. great!

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 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: key words
• what made the person start the business listed – the company
started selling
• what skills they lacked when starting out and how they overcame this shares on the
obstacle Johannesburg
Stock Exchange
• any qualifications they have to run the business (JSE)
• the characteristics the person says are important to become successful retailer – a shop
• any advice the person has for young entrepreneurs. 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.

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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 Incredible Connection is one of the
and have an ability to complete tasks. 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.
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 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
or resources. An example of ethnic Zulu beadwork

Activity 8.4 Identify the skills needed to be an entrepreneur key words

ethnically decorated
Read the case study about Sheila again and then answer the questions. − an African
1. What skills does Sheila have for running her business? Where do you design with ethnic
patterns and
think she learnt these skills? (4)
animal themes
2. Anthony is in the retail industry, whereas Sheila is in the manufacturing
industry. Explain the difference between these two types of businesses. (2)
3. Who are Anthony’s customers and who are Sheila’s customers? (2)
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)

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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:
• Buy • Produce
• Sell • Make a profit

Buying
The first basic function that an entrepreneur has to perform is buying or
purchasing equipment, raw materials and stock.

key words Different businesses need different kinds of equipment to run the business.
For example, a business might need furniture, computer equipment,
equipment – assets
like machines that machinery or vehicles. This equipment is also known as capital items. The
are used in the entrepreneur needs to decide what equipment is needed and where it will be
operation of a
business purchased. When buying the equipment the entrepreneur negotiates the price
raw materials – with the supplier.
things that are
used to make Raw materials are things that are used to make other goods. They are the
other goods
inputs – the inputs in the production process. Examples of raw materials used by a business
specifications and that makes furniture include wood, nails, glue, fabric and leather. All these
materials in the
production process
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.

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 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. key words
producing − the
Not all businesses produce goods. Some businesses sell a service without act of making
making any physical product. Businesses that do produce products are known a product by
transforming raw
as manufacturing businesses. In a manufacturing business the entrepreneur materials into
needs to decide what will be produced and how it will be produced. In other goods
selling − the act
words, the entrepreneur decides what the production process will be to make of convincing
the products. 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.

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Topic 8 Unit 3

Selling is the action of persuading a customer to purchase a good or service.

Making a profit
key words 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
make a profit − the
act of ensuring business, the entrepreneur needs to keep good records of how much money is
that income made and how much money is spent. These are known as financial records.
(revenue) is
greater than The financial records help the entrepreneur to keep track of how much money
expenses is coming into the business (income) and how much is flowing out (expenses).
financial records − a
list of the income
Entrepreneurs try to make as much profit as they can. To do this, they try to
and expenses of a maximise the income of the business and minimise the costs (expenses) of
business
the business.
maximise − get
as much out of
something as you
can
Activity 8.5 Describe what an entrepreneur does
minimise − keep low Imagine that a friend of yours, Gavin, has decided to open a business that
as possible
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)

98
 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.

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 Topic 9 Starting a business
Entrepreneurship

Topic overview
• Identify consumer needs and wants. • Understand the principles of
• Analyse strengths, weaknesses, advertising.
opportunities and threats. • Prepare a budget for an Entrepreneurs’
• Look at setting and achieving goals. Day.
• Explain the concept of advertising. • Do various cost calculations.
• Analyse different media in advertising.

100
 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 key words
and need, you need to do research. This kind of research is called a needs needs analysis
– research to
analysis and it can also help entrepreneurs to think of new business ideas. find out what
the needs of
The needs of people and communities can the people or
include the need for fun and relaxation or a need community are
resources – the
for transport from their homes to work. things we use to
produce goods
Businesses in a community will show you what and services
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.

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.

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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. 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)
2. Make a list of the needs and wants that these businesses satisfy. Write
down as many ideas as possible. (5)
3. Do the local businesses satisfy your community’s needs? Can you think of
new businesses to fill any gaps? (5)
4. Make a list of the needs and wants of the following people in your school:
• Pupils
• Teachers
• Headmaster/headmistress
• Parents
• Cleaning staff (5)
5. Think of at least three business opportunities that you could investigate
starting at your school. (3)
6. 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.

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 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 key word
a consumer you have a role to play in protecting the environment by buying recycle − reusing
waste products
recycled products. Look for products that have the recycled sign.

Activity 9.2 Campaign for recycling

1. Form groups of between two and four people.
2. As a group, identify places where recycling bins can be placed in your school.
3. Decide on a particular resource that you want to recycle, for example, paper.
4. 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 Did you know?

1. Choose any three of the materials above and write down three products For every ton of
you could make using this material. (6) paper 17 trees can
be put to other
2. Identify three ways in which you could use recycled products in your uses.
business. (3)

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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. Do a SWOT analysis where you make a list of the potential strengths,

weaknesses, opportunities and threats of this idea. (8)
2. Discuss ways in which Kevin could utilise the strengths and opportunities
in order to make a success of his business. (2)
3. Discuss things that Kevin could do to avoid the weaknesses and threats
you have identified. (3)
4. Think of a business idea and draw up a SWOT analysis of your own idea. (8)

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 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 key words
goals helps people build their self-confidence and gives them a sense of purpose.
goals – something
You should always set a date by when you want to have achieved your goal. you want to
achieve in the
For example, Mary Jones is in Grade 7. At the beginning of the year she set the future
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.

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. Make a list of your goals for your business. (6)
2. Classify your goals into short, medium and long term goals. (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)

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Topic 9 Unit 5

Unit 5 Advertising
Concept of advertising
key words Marketing means developing ways to increase the number of sales for a
marketing – ways to product. Marketing looks at the four Ps which are:
increase the sale
of something • Product – what are you going to do that makes your product unique? What can
promotion – event you do to make people want to buy your product (packaging, ingredients)?
or campaign to
• Price – how does the price compare to that of the competitors?
encourage people
to buy something • 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.

product 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)

One of the main tools used in marketing is advertising. Businesses need to

key words promote their products and services by using advertising. It does not matter how
advertising – a tool brilliant the business idea is: if nobody knows about your business, it will fail.
used to promote
your business Advertisements need to reach the target market, so they need to be:
target market
– potential • placed in the correct place, for example, it would not be a good idea to
customers who advertise farming products in a ladies fashion magazine.
would buy your
product/service • at the correct time, for example, it would not be a good idea to advertise
media – places shorts in winter.
to advertise or
spread news The places where adverts appear are called the media, for example, magazines,
newspapers, radio, television, banners, posters, etc.

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 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.
AMAZING!
New phone that changes colour
Activity 9.8 Analyse an advert 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
people’s attention. (3)
2. Does the advert keep you interested? Give a reason for
your answer. (2)
3. Are you keen to buy the advertised product? Explain why. (2) Available at all leading cell phone shops
4. How does the advert try to get people to buy the product? (2) or phone 0800 445 5511
5. This is a print media advert. Redesign the advert and its Other incredible features
information to make a user-friendly web page. (4) internet connection / WiFi
6. Would you advertise this product on the television? Give
reasons for your answer. (3) An example of an advert

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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 726
Loan from Mom 500
Capital from owner 1 500 Note:
TOTAL MONEY RECEIVED 2 726 • The budget is divided into
MONEY PAID three sections:
Table hire 300 1. Money received
Cleaning materials 12 2. Money paid
Oranges 850 3. Calculating the amount
Advertising 50
of money left over
Telephone costs 60
• How to calculate the deficit
Bottles for juice 160
or surplus
TOTAL MONEY PAID 1 432
SURPLUS/(DEFICIT) 1 294
CASH AT BEGINNING (306)
CASH AT END 988

A business not going according to plan.

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 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
more money. Write this information in a report. (20)

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Topic 9 Unit 7

Unit 7 Costing
Cost calculations
key words Below is a simple way of calculating the costs of making the product you want
fixed cost – a cost to sell. You need to do the following calculations:
that does not
change no matter Fixed costs + variable costs = total cost of production
how many items
are made Fixed cost + variable costs = unit cost (i.e. cost to make one item)
variable cost – a No of units made
costs that increases
or decreases
depending on Fixed costs
how many items Fixed costs are those costs that a business pays no matter how many goods it
are made
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

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 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

(10)
2. 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

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Topic 9 Unit 7

Calculate the following:

a) Total fixed costs (2)
b) Fixed costs per unit if Courtney makes 100 bracelets per week (2)
c) Total variable costs (2)
d) Variable cost per unit if 100 bracelets are made (2)
e) Total cost per unit. (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.

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 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. Work out how many items you think you can make with the items
purchased above. (3)
5. Calculate how much it will cost to make one unit. (3)
6. After calculating the cost of one unit, decide how much you would sell
the product for. Use the information above to assist you. (3)
7. Write a short paragraph explaining how you determined your selling
price. (5)

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 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.

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Topic 10 Entrepreneurs’ Day

Entrepreneurship

Topic overview
• Research effective planning. • Draw up an income and expenditure
• Discuss the advertising of products. statement.
• Discuss the selling of products.

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 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:
market research –
finding out details • Who your target market is.
about possible • What they enjoy or need.
customers
• 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.

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 Unit 1 Topic 10

Activity 10.1 Design a questionnaire and interview your

key word
market
questionnaire – list
To find out about your target market, you and your group must design a of questions that
questionnaire and use it to interview as many people as possible. You can people answer on
a form
adapt and use the example of a questionnaire below:

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.

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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. From the photos below, try to identify which person is going to be playing
each of the roles in the sandwich-making business.
a) b)

e)

c)
d)

(5)
2. Write a sentence or two describing each person’s responsibilities in the
business. (5)
3. 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)
4. 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.

118
 Unit 1 Topic 10

Checklist for Entrepreneurs’ Day

Purchasing

Production
Marketing

Financial
TASK

General
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. 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.
2. Tick the appropriate column for each one, and keep this list in a safe place.

119
 Topic 10 Unit 1

Resource Already Must Need Need to Who is responsible for

needed have borrow permission 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.

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
Decide on a selling
price for the beaded • spent on equipment.
necklaces
You must also keep till slips for everything you buy or spend in your business.

Capital
key word
People often think you need a lot of money to start a business, but this is not
starting capital – always true. Most businesses need some starting capital, but many businesses
money needed to
start the business 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.

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 Unit 1 Topic 10

Activity 10.4 Draw up a loan agreement

1. Discuss the amount that you are going to need to borrow from your
parents or caregivers as an investment in your business.
2. 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.
key word
When you begin a new business activity, it
is unlikely that everything will go well right evaluate – to
study something
from the start! It is very important to evaluate carefully to see
your business because this allows you to learn from mistakes. (10) 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. How many products did you make? (1)
2. What was the total unit cost of each product? (1)
3. Multiply the number of products you made by the cost of each one to
give you the total of your costs. (1)
4. Did you spend money on anything else, such as marketing, equipment
hire, or rent to the school? List these expenses and add them up. (5)
5. Add the answers for 3 and 4 together to get your total costs. (2)
6. 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)
7. 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)

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 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
Income and
Freddy’s Fries
Expenditure
Income and Expenditure Statement for December 20.1 Statement − a
financial report
TOTAL INCOME 870 that is used to
Money received from sales 850 calculate the
profit or loss made
Donations received 20 by the business
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

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
Topic 11 Inequality and poverty

The economy

Topic overview
• Investigate the causes of socio- to fight inequality and injustice.
economic imbalances. • List the urban and rural challenges.
• Research the inequality in South Africa. • Discuss the creation of sustainable job
• Discuss the education and skills needed opportunities.

125
Topic 11 Unit 1

Unit 1 Causes of socio-economic imbalance

Socio-economic imbalance is a term used to describe a situation where
people do not have equal access to resources. Inequality is another word used
key words for imbalances. We say that there is social and economic inequality when
one group of people have significantly more money, power or resources than
socio-economic
imbalance – a another. This is another way of saying that there is a gap between the rich and
situation where the poor.
people do not
have equal access
to resources
There are some very wealthy people in South Africa. These people earn a great
inequality – deal of money, have access to resources and enjoy a high standard of living.
imbalance 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)
2. Write a list of all the possible reasons why these people ended up being poor. (3)
3. Discuss what resources these people have. (3)
4. Discuss which basic needs these people are able to satisfy. (3)
5. Write a list of ideas that these people could use to escape poverty. (4)

Some people live in poverty with limited access to resources.

126
 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.
• Sexism. Sexism refers to a situation where someone is discriminated against key words

because of their gender. In some societies men are paid more than women economic inequality
– the gap between
for the same work. Sometimes women are discriminated against and not the rich and the
allowed to do certain types of work or to get promotions. poor
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
In South Africa, for example, there were certain kinds of work that black will – a legal
document
people were not allowed to do before 1994. Black people were prevented that provides
from earning high levels of income because they were not allowed to work information on
what to do with
in jobs that were reserved for white people. your assets should
• Personal preferences. Some people choose to do work that is poorly paid you pass away
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 work to do and where to do it can also influence their level of income.
prejudice – a
• Innate ability. Some people have special talents and abilities that enable
negative opinion them to earn more money than others. For example, some sports people,
or judgement
actors and singers, have an ability to earn large sums of money because of
of something
or someone the talent they were born with.
made without • Nepotism. Sometimes people are able to get jobs because of the people they
knowledge or
considering the know. For example, some individuals are lucky that their parents own large
facts businesses and they are able to get employment in their parents’ business.
social attitude – a
way of feeling So the level of a person’s income is sometimes determined by who they
or thinking know or who they are related to.
which exists in a
particular culture
at a particular Causes of social inequality
time. It is a form
Social inequality refers to a situation in which certain groups of people do not
of prejudice which
is widely held have equal social status, social class, and access to resources. Social inequality
within a certain is the result of discrimination and restricting people’s opportunities and
society
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.

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
It is important to limit their opportunities to take part in the everyday social and economic life
ensure the inclusion of the country.
of disabled people in
society.
Activity 11.2 Explain the causes of social and economic
inequality
1. In your own words, explain the difference between economic inequality
and social inequality. (4)
2. Discuss two causes of economic inequality. (2)
3. Discuss the cause of social inequality. (3)

128
 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
key word
of socio-economic inequality in the country. Nonetheless, there is still an
inequitable – unfair
inequitable distribution of income and wealth in the country and social
inequality still continues.

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
child orphaned. There are approximately 147 million orphans in the world,
of which 1.5 million live in South Africa.

key word Poverty is not only unequally distributed across racial groups in South Africa.
Poverty is also unequally distributed across different geographic regions in the
infrastructure – the
basic physical country. There are some areas of the country that are well resourced with good
systems that infrastructure and services such as running water and electricity. In other
support economic
and social activity, areas, people live without access to running water, no electricity and with a
for example, non-existent infrastructure. The pictures below show the differences between
roads, electricity
and water 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 Apartheid – a system
of discrimination
Social Sciences course. In this book we will look at the influence of Apartheid’s in which black
economic policies on ownership and how this has affected poverty and wealth people in South
Africa were
in South Africa. unfairly treated
and prevented
The word ‘Apartheid’ comes from the Afrikaans word for ‘apartness’. Apartheid from taking part
was a system that discriminated between different people on the basis of their in the economic
life of the country
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.

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. List three laws that were passed during the Apartheid era in South Africa. (3)
2. Describe one of the Apartheid laws. (2)
3. 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 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
poverty − to be
extremely poor 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 Work No Education

No Skills
The poverty cycle

Education and skills training

One way to break the poverty cycle
is through education and skills
development. When people are
key word empowered with knowledge and
education they are more equipped to
exploitation – abuse
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
injustice. to escape the cycle of poverty if they
don’t get the necessary education.
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 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 Urban and rural challenges

An urban area is an area where many people live (i.e. it is densely populated).
Did you know?
Urban areas are built-up areas with many houses, shops, offices, entertainment
The word ‘urban’
comes from the centres, and public buildings. Urban areas have a well-developed infrastructure
Latin word urbs (such as roads, electricity, sewerage works and running water).
which means city.

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.

A rural area is an area where not very many people live (it has a low
Did you know?
population density). Rural areas are not well developed or built up and they
The word ‘rural’
comes from the have a great deal of open space. They consist of natural countryside and
Latin word rus farming lands. Rural areas have a poorly developed infrastructure (public
which means services like running water and electricity may not be well provided).
countryside.

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?
In 2012
• Influx of people. Many people come to cities looking for employment and Johannesburg was
entertainment. This creates an influx of people that makes the cities more the largest inland
populated. city in the world.

• Traffic congestion. There are many cars and other types of vehicles in
cities. These create traffic congestion and put strain on the road system. key words
Transport within urban areas can be a difficult problem to deal with.
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
The dense population of people in urban areas creates challenges like traffic of vehicles
congestion.

137
 Topic 11 Unit 4

Did you know? Socio-economic challenges in rural areas

Before Africa was There are also many social and economic challenges in rural areas. These
colonised by people
include:
from the West, African
people had traditional • Lack of infrastructure. The
methods of planting infrastructure in rural areas
and harvesting crops, is mostly underdeveloped.
making and enforcing
This means that roads are
laws, producing music,
recording history, often in bad shape or don’t
and using plants to exist at all. Services such as
cure illness. They had
electricity and water are also
techniques for building
huts and hunting not easy to access. One of the
animals. They had their consequences of this is that
own ways of dealing with some people in rural areas
marriage and education. One of the challenges faced by those living in
have to spend quite a big rural areas is the lack of infrastructure and public
These indigenous
knowledge systems were part of their day collecting services.
suppressed and replaced water and firewood. This lack
by the foreigners who of infrastructure contributes to a lower standard of living in rural areas.
settled in Africa in favour
of Western ideas and • Inadequate access to public services. Public goods and services (like
ways of doing things. schools, hospitals and clinics) are not well provided for in rural areas. This
Today in an effort to means that it is difficult for people living in rural areas to get healthcare
reduce poverty, some
and an education. People in rural areas often have to travel long distances
rural communities
are moving back to to visit a doctor or get to school.
embrace indigenous • Lack of employment opportunities. Because there is a lack of economic
knowledge and are activity in rural areas, it is often difficult for people to find jobs there. Levels
starting to use traditional
farming methods again
of unemployment are generally much higher in the rural parts of South
and traditional ways Africa.
of managing scarce
resources (like water).
These indigenous
Activity 11.6 Identify the socio-economic challenges in rural
knowledge systems are and urban areas
more suitable for local
conditions are helping 1. Explain, in your own words, what the difference between a rural and
to achieve sustainable urban area is. (4)
development and grown 2. Find a picture from a newspaper or magazine that clearly illustrates a
in some communities.
typical rural area. (2)
3. Find a picture from a newspaper or magazine that clearly illustrates a
key words
typical urban area. (2)
Indigenous
knowledge − the
4. Do you live in a rural or urban area? Give reasons for your answer. (2)
local knowledge 5. What are the socio-economic challenges that exist in urban areas? (4)
which is unique to
6. What are the socio-economic challenges that exist in rural areas? (3)
a given culture or
society

138
 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 Men hold placards offering temporary employment

job opportunities 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
Encouraging manufacturing
One way to create jobs in a country is to encourage entrepreneurs to start
infrastructure − the
basic physical manufacturing businesses. The advantage of a manufacturing business is
structures, that it usually requires large numbers of workers, unlike service businesses
facilities and
services (such as which generally only employ a few people. The government of a country can
roads, electricity, stimulate manufacturing businesses by offering incentives and subsidies to
water and sewage
systems) that
entrepreneurs who are engaged in making products.
improve people’s
quality of life and
make it easier to
Improving the infrastructure
conduct business 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. Explain how promoting entrepreneurship and new businesses creates job
opportunities. (5)
2. What is meant by the term ‘infrastructure’? (3)
3. What can the government do to encourage manufacturing? (2)

140
 Summary

Unit 1 Causes of socio-economic Unit 3 Education and skills to fight

imbalance inequality and injustice
• Socio-economic imbalance is a term used • The poverty trap refers to a situation in
to describe a situation where people do not which poor people do not have access to
have equal access to resources. adequate education.
• Socio-economic imbalances cause a large gap • Being uneducated means the people cannot
(inequality) between the wealthy and the poor. get good jobs and this keeps them poor.
• Economic inequality refers to the gap in • One way to escape the poverty trap is to get
levels of wealth and income between the better education and skills training.
rich and the poor. • Good education and skills make it easier to
• The main reason for economic inequality avoid unemployment.
is differences in the wages and salaries that
people earn. Unit 4 Urban and rural challenges
• Social inequality refers to a situation in which • An urban area is an area where many
certain groups of people do not have equal people live (it is densely populated).
social status, social class, or access to resources. • A rural area is an area where not very many
• Social inequality is the result of prejudice, people live (it has a low population density).
social attitudes and spiritual beliefs. • The socio-economic challenges of urban
areas include: high costs of living, pollution,
Unit 2 Inequality in South Africa influx of people and traffic congestion.
• South Africa is a country where there • The socio-economic challenges of rural
are high levels of social and economic areas include: lack of infrastructure,
inequality. inadequate access to public services and
• One example of socio-economic inequality lack of employment opportunities.
in South Africa is the level of poverty
among the different racial groups. Unit 5 Creating sustainable job
• Poverty and unemployment are more common opportunities
among black families in South Africa.
• Many people in South Africa are
• The high levels of socio-economic inequality
unemployed.
in South Africa are mostly the result of
• Unemployment rates in South Africa are
a policy called ‘Apartheid’, which was
generally higher among women, young
introduced as a law in South Africa in 1948.
people, disabled people and those without
• Apartheid resulted in many laws and
education and training.
practices that discriminated against people
• Strategies to create employment include:
on the basis of their skin colour.
° Promoting entrepreneurship and new
• Apartheid was enforced to give white
businesses
people in South Africa control over the
° Stimulating business development
economic resources of the country.
° Encouraging manufacturing
° Improving the infrastructure.

141
 Term 3 Revision

Topic 8 The entrepreneur

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

Topic 9 Starting a business

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

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
Activity 10.1 in your journal. (10)
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
received, as well as your financial records. (5)
8. Complete your Income and Expenditure Statement in your journal. (5)
9. a) Write a concluding paragraph about your experience as an
entrepreneur. (5)
b) Include a SWOT analysis (in your journal). (4)
Total [45]
Remember to complete the group’s performance rubric below.
1. Use this rubric to evaluate your group’s performance:
Assessment Level 4 Level 3 Level 2 Level 1 Learner’s
criteria Excellent Good Satisfactory Unsatisfactory level
What worked The selling day was an The group The group attempted The group did not have
well outstanding success; was organised and to sell but forgot to anything to sell on the
the group was well well prepared bring all the necessary day.
prepared and the for the selling day. things.
business ran without
any problems.
Working in a An active member An active group A passive group Unable to work with
group of a working group, member but still member requiring others in a group – little
successful requiring some direction and participation, even
in a variety of roles. direction and supervision from rejection of the group’s
supervision from others. activities.
others.
Suggestions for Insightful and realistic Some constructive Some inappropriate Made no attempt.
improvements suggestions for thought given suggestions for
improvements. to possible improvements.
improvements.
Learning that took Learnt many new Learning was clearly Some learning took Made no attempt to
place during the skills such as working evident as many place but needed participate in the group;
entrepreneurial with people and other problem-solving skills more of an effort to did not make an effort
activity important business skills. were learnt. participate and try the to sell.
activity.

143
 2. Your teacher and classmates will assess your group using the following rubric:
Assessment Level 4 Level 3 Level 2 Level 1 Learner’s
criteria Excellent Good Satisfactory Unsatisfactory level

Calculating A detailed explanation Simple and accurate Attempted to calculate No financial

profit of the costing and calculations done but profit but the selling information given.
selling price calcula- details not included. price and cost price
tions which accurately calculations were
determined the profit inaccurate.
or loss of the selling
day activities.
Market Thorough and Meets the basic Attempted to do Irrelevant market
research comprehensive research requirements market research, research shows no
research is done and shows some but limited and does valuable information.
that shows a lot of valuable information. not show enough No questionnaire was
important information. A good questionnaire information. A simple designed to establish
An excellent which helped with questionnaire. the needs of the target
questionnaire which identifying some of the market.
allowed the group to target market’s needs.
meet the needs of their
target market.
Producing an Advert attracts Advert attracts Advert attracts Poor advert that does
advert attention, is appealing, attention, is generally attention but does not attract attention.
gives the necessary appealing with some not give enough No or few posters
information and lots of information. information to let displayed around the
people were attracted people know where or school.
to the table. when product will be
sold.

Topic 11 Inequality and poverty

1. Explain the difference between economic and social inequality. (8)
2. Discuss two causes of economic inequality. (4)
3. List two examples of social inequality. (4)
4. South Africa has one of the highest levels of socio-economic inequality
in the world. Discuss how Apartheid contributed to this problem. (5)
5. Explain, in your own words, what is meant by the poverty trap. (6) 
6. Explain the difference between a rural and urban area. (4)
7. Discuss two socio-economic challenges in urban areas. (8)
8. Discuss three strategies that could be used to create sustainable jobs in
South Africa. (6)
Total [45]

144
Topic 12 The production process

The economy
Topic overview
• Define production. economic growth.
• List inputs and outputs. • Discuss technology in the production
• Discuss sustainable use of resources. process.
• Define the meaning of economic growth. • Describe the contribution of
• Define the meaning of productivity. technology to improving productivity
• Research the effect of productivity on and economic growth.

145
Topic 12 Unit 1

Unit 1 What is production?

key words 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
production − the
process of taking is known as production. Production is the process of taking raw materials and
raw materials and transforming them into useful goods and services. The raw materials used in the
transforming them
into useful goods production process are also known as resources or factors of production. You will
and services learn more about these inputs in the production process in Unit 2. In this unit
template – pattern
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.

How to make a vest

Before Round 1, make Step 1: Use the templates to
templates for the front and trace the vests onto newspaper. Each group needs an old newspaper,
back out of cardboard Cut them out.
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.

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
 Unit 1 Topic 12

Activity 12.1 Learn about the production process Did you know?
1. After you have played both rounds of the game, discuss the Sometimes people think that
because an idea or product
following questions in your groups:
comes from overseas that it
a) Did everybody in your group contribute and share ideas? must be good. It is strange
b) Did anyone become the group leader? If so, how did this how sometimes people
happen? over-value anything that is
foreign while under-valuing
c) How were your resources (scissors, pencils, and so on) used
things that come from their
in Round 1? Did you have problems sharing the resources? own country. This is true
d) Did your group use its resources differently in Round 2? particularly in Africa, where
sometimes indigenous
e) In which round did your group make the most vests? Why
knowledge systems and local
do you think this happened? ways of doing things are
f) In which round were the vests of better quality? Why? not respected. Indigenous
g) How did your group make decisions in Round 1? Were they knowledge is the term used to
describe the local knowledge
made the same way in Round 2? If not, how was it different
which is unique to a given
and did this affect the production process? culture or society. Within any
2. Write a report on how your group worked together as a team. culture or society there are
Explain the problems that you had and how you solved them. certain age-old practices and
ways of farming, dealing with
List any important lessons you learned while playing the game health problems, preparing
that would help if you were to start a real business. food, and managing resources.
These traditional practices
embody the indigenous
knowledge system for that
The three stages in the production process society. When we design new
The production process consists of three stages: the primary stage, the products and production
secondary stage and the tertiary stage. processes we should be careful
not to make the mistake of
over valuing foreign ways
The primary stage of production of doing things. Instead we
During the first or primary stage of production natural resources are should make room for the
possibility that there may be
taken from the earth. The primary sector is made up of businesses
local indigenous knowledge
that are involved in the first stage of production. These businesses that could be used to produce
are sometimes called extractive industries because they often extract a better product that is more
things, such as crops or metals, from the ground. The primary sector suitable for local conditions.

includes mining, fishing, forestry and farming.

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

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Topic 12 Unit 1

The secondary stage of production

key words In the secondary stage of production, products are manufactured from the
natural resources extracted in the primary stage. Businesses in the secondary
secondary sector
– in this sector sector of the economy process the primary sector products and turn the
products are being natural resources into finished goods. Examples are flour mills, factories,
manufactured
from raw materials sawmills and car manufacturing plants.
manufacture – to
make goods,
usually using
machines
tertiary sector –
in this sector
businessess
provide services
rather than make
goods

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

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 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)

Row D

j) k) l)

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 It is ground into meal Maize meal sold in shops
is harvested. and packed. and cooked at home.

(6)

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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)
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
Entrepreneur
• capital
Labour • entrepreneurs.

Natural resources (land) are the

Production 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.
Capital
Labour describes the people involved
in the production process. Labour
key word
refers to the physical and mental
natural resources
(land) – the
effort that people provide to produce
resources provided goods and services. The human
by nature that
part of any production process is
are used in the The four factors of production
production process classified as labour.
labour – the
physical and Capital is the term used to describe all the man-made objects that are used in
mental effort that
the production process. Examples include buildings, machinery, equipment,
people provide
to produce goods furniture, vehicles and computers. Money is also considered to be a capital item.
and services Any natural resources that have been processed are also considered to be capital.
capital – the man-
made objects that Entrepreneurs are the people who start businesses. They are individuals who
are used in the
production process identify business opportunities, plan the production process and then produce
entrepreneur – an the goods or services needed. Entrepreneurs combine the other three factors
individual who
starts, owns of production to provide useful goods and services. Entrepreneurs identify
and manages business opportunities and make them work.
businesses

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 Unit 2 Topic 12

Activity 12.3 Identify the inputs in the production process

1

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
step of the process. (3)
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,
capital, entrepreneur. (4)
c) Could any of these inputs be replaced by another input? Give two
examples. (2)
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

A renewable resource is a natural resource with the ability to replace itself
key words through some biological or natural process. Renewable resources can be
renewable resource replenished in time. Examples of renewable resources are:
− a natural
resource with the • water
ability to replace • oxygen
itself through
some biological or
• timber
natural process • fruit and vegetables
non-renewable • meat from animals.
resource − a
natural resource
There is an endless supply of some renewable resources such as solar energy,
that cannot be
replaced wind energy and geothermal pressure. Other renewable resources such
sustainability − the as wood, oxygen, leather and fish need some time or effort to regenerate
process of using
resources in such themselves. Most precious metals are also considered renewable even though
a way that we do they are not naturally replaced. They can, however, be recycled because they
not deplete them
deplete – keep using
are not destroyed during their extraction and use.
something until
there is nothing A non-renewable resource is a natural resource that cannot be replaced.
left 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

There are a number of strategies we can implement to ensure that we make
A recycle bin
sustainable use of resources. These include:

152
 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. Explain the difference between renewable and non-renewable resources. (4)
2. List three strategies that can be implemented to use natural resources
sustainably. (3)
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
Activity 12.5 Identify factors that contribute to economic
economic growth –
growth
an increase in the Work with a partner and answer the following questions:
level of economic
output over time 1. What would happen if the economy of a country did not grow? (4)
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.

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 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
because more people have jobs and Carnarvon in the Northern Cape will soon be host to the new
more money is being circulated in the Square Kilometre Array radio telescope. This development
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
consequences of economic growth. (10)

155
Topic 12 Unit 5

Unit 5 Productivity
key words You have learned that production is the process of combining resources in
order to produce goods and services. You have also discovered that resources
productivity −
how efficiently are scarce and that they need to be used wisely to ensure sustainability.
resources are Productivity is a word that is used to refer to how efficiently resources are
being used to
generate products being used to generate products and services. Increasing productivity refers to
and services the process of improving the use of resources to get more out of them so that
morale − confidence
and enthusiasm
more goods and services can be produced.

Activity 12.7 Think about your own productivity

1. 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)
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)
b) What factors prevented your team from being more productive? (2)
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. Explain in your own words what is meant by productivity. (2)
2. Explain in your own words what is meant by the term economic growth. (3)
3. Explain how productivity leads to economic growth. (8)

158
 Unit 7 Topic 12

Unit 7 Technology in the production process

key word
You have already learned about the four factors of production (land, labour,
technology − any
capital and entrepreneurship) and the role they play in the production machinery,
process. In this unit you will learn about the role of technology in the equipment or
tools developed
production process. 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
on the production process and changes the way goods and Technology changes the way people
services are produced. communicate and do business.

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 key word
expensive for businesses to use technology, especially when the technology purchase − buy
is imported from other countries.

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 key words

Generally speaking, technology has the potential to improve productivity.
efficiency – the
Technology enables humans to do things faster and better. Technology also speed with which
improves efficiency and effectiveness. This is often true in the production a task is done
effectiveness – how
process as well. Using technology can enable businesses to produce more
well the task is
goods and to get more out of the other factors of production. The use of done
technology can increase productivity and result in an increase in the levels of
production.

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

has a negative effect on the environment and on people’s standard of living.

Did you know?
It is also true that technology often creates jobs for people with a high level of
In some countries
of the world skill (engineers and technicians) but makes it harder for those with low levels
cashiers in shops of education to gain employment.
have been replaced
with self-checkout
points. Technology
has thus replaced
cashiers.

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. Explain in your own words what is meant by each of the following terms:
a) Technology
b) Productivity
c) Economic growth. (6)
2. Describe the relationship between technology, productivity and economic
growth. (10)

162
 Summary
• A renewable resource is a natural resource
Unit 1 What is production?
with the ability to be replaced through
• Production is the process of taking raw
some biological or natural process.
materials and transforming them into
• A non-renewable resource is a natural
useful goods and services.
resource that cannot be replaced.
• The raw materials used in the production
• Sustainability refers to the process of using
process are also known as resources or
resources in such a way that we do not run
factors of production.
out.
• The first or primary stage of production is
• Strategies to make sustainable use of
when natural resources are taken from the
resources include: reusing resources,
earth.
reducing use of resources and recycling.
• The primary sector is made up of businesses
that are involved in the first stage of
Unit 4 Meaning of economic growth
production.
• Economic growth is a process that occurs
• In the secondary stage of production,
when there is an increase in the quantity of
products are manufactured from the natural
goods and services produced in the country.
resources extracted in the primary stage.
• Currently South Africa’s economy grows at
• Businesses in the secondary sector turn the
a rate of about 3% per year.
natural resources into finished goods.
• Economic growth can be achieved by
• The third or tertiary stage of production
making better use of the four factors of
consists of businesses that provide services.
production.
• Economic growth leads to a reduction in
Unit 2 Inputs and outputs
unemployment and poverty and results in an
• Inputs, also known as the factors of
increase in the standard of living.
production, are the resources used in the
production process to make goods and
Unit 5 Productivity
services.
• Productivity is a word that is used to refer
• There are four groups of factors of
to how efficiently resources are being used
production: natural resources (land),
to generate products and services.
labour, capital and entrepreneurs.
• Increasing productivity refers to the process
• The outputs of the production process refer
of improving the use of resources to get
to the products that the business produces.
more out of them so that more goods and
• There are two kinds of outputs: goods and
services can be produced.
services.
• Productivity can be improved by increasing
the motivation of workers, improving their
Unit 3 Sustainable use of resources
level of skills and making better use of
• Resources are scarce − there are a finite
technology.
number of them and so we need to use
• Improvements in productivity lead to
them economically.
economic growth in the country, which
in turns leads to an improvement in the
standard of living.

163
 Unit 6 The effect of productivity Unit 8 Contribution of
on economic growth technology to improving
• When the productivity of labour is low productivity and economic
there is a waste of resources and a decrease growth
in the level of output. • Technology can lead to an increase in
• Improvements in productivity lead to productivity, which leads to more goods
economic growth in the country which and services being produced.
in turns leads to an improvement in the • Technology can lead to an increase in
standard of living. output which gives rise to economic
• The government thus tries to encourage growth.
productivity in order to promote economic • Although technology can lead to economic
growth and reduce poverty in the country. growth, it can also lead to increased
levels of unemployment when people are
Unit 7 Technology in the replaced by machines.
production process • Technology can also have a negative impact
on productivity when it causes people
• Technology can be used in the production
to be distracted from their work or when
process to improve the use of the other four
they have to learn new systems and new
factors of production.
production processes.
• Technology leads to new developments
which lead to new production processes.

164
Topic 13 Savings

Financial literacy
Topic overview
• Understand the difference between services they offer.
saving and investing. • Research how to open a savings
• Understand what is meant by return account.
and the rate of return. • Discuss what community saving
• Understand why people save and the schemes are.
purpose of saving. • Understand the services provided by
• Discuss the history of banks. financial institutions and organisations
• Explain the role of banks and the promoting entrepreneurship.

165
Topic 13 Unit 1

Unit 1 Personal savings

key words Personal savings and investing

personal savings People can either spend all the money they earn or receive, or they can keep
– the money some of it to spend at a later stage. Personal savings refer to the money a
you keep for
emergencies or person keeps instead of spending it all. Investing is using the money you save
the future to earn more money.
investment −
purchase of Saving and investing are important to help people, families and businesses
property or shares
or money saved in have a better life in the future. Many people spend all the money they earn on
the bank in order to everyday living expenses. If they lose their jobs or form of income, they have
earn more money
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. 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.
2. 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
It is a good idea
need money to do this. Entrepreneurs wanting to start their own businesses also to save money for
need money. They either have to save their own money or they have to borrow emergencies.
money from banks or from those people who have saved some of their money.

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 more businesses

investment
saving and equipment

more jobs more goods increase in

available produced standard of living

Activity 13.2 Think about the purpose of saving money

1. List five reasons why people save money. (5)
2. 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)

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 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.

Because the goldsmiths stored so many gold coins, and knew that most of the
key words 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
depositor – person
who leaves money later. To borrow money in this way, the borrower had to pay the goldsmith
for safekeeping 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.

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 Unit 2 Topic 13

The two extra coins were the cost of borrowing the money. In this way the
Did you know?
goldsmith made money by lending out other people’s money. This is exactly
The first bank to
what banks do today. be established
in South Africa
The first modern banks were established in the 17th century. In South Africa First was called the
National Bank started as the Eastern Province Bank in Grahamstown in 1838. Lombaard Bank. It
was owned by the
The role of banks government and it
opened in 1793.
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 R200 000
between people and businesses who save and
invest money; people and businesses who
need money; and between those earning Bank
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).
Entrepreneur
The bank now has R200 000 that it can lend R200 000 loan +
out for two years to an entrepreneur who R48 000 interest
wants to start a business. The entrepreneur
has to pay the money back in two years and
Bank
is charged 12% interest per year to borrow
the money (12% x R200 000 = R24 000 per
year).

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

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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

Today, banks not only look after your money and provide loans; they also
provide other products and services. Some of these services include:
key word
• ATMs: The bank has special machines at the branch, or in or near shops,
ATM − a machine where you can withdraw cash, make cash deposits, transfer money or pay
at a bank or near
shops that you can accounts. These machines operate 24 hours a day, 7 days a week. This
use to withdraw means people have access to their money all day and all night.
cash at any time of
the day or 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) D raw 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)
b) 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 You can get more
benefits that place you in control of how you enjoy your money information from
• A debit card you can use to withdraw cash at any ATM and buy stuff at any store the following
displaying the Maestro or VISA sign, if you have money in your account. websites: www.
• No monthly management fee standardbank.
• 4 Free electronic debit transactions (which include cash withdrawal at Standard Bank co.za; www.
ATM and card swipes) absabank.co.za;
• 4 Free ATM cash deposits www.fnb.co.za;
• 1 Free branch cash deposit www.nedbank.
• Free bank card co.za
• 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

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

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 Interest
3 The cost of borrowing C New factories and other businesses can be built and
money new jobs created
4 Why saving is important D Taking the money you save and putting it into
for an individual person 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 G The changing of South African rands into American
for the country 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
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

(10)
2. Explain in your own words what you need to do if you want to open your
own savings account. (5)

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 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’. Did you know?
In 2003 a study
Today stokvels are not only formed by low income people but they also exist was done by the
amongst high income earners who have started investment stokvels, birthday University of Cape
Town which found
stokvels and even tourism stokvels, where the money goes to pay for holidays that black adults
locally and overseas. in South Africa
invested about
Stokvels have been around in South Africa for over 150 years and are like R12 billion a year
a savings club. They are formed by a group of people who agree to support in stokvels.
• 47% of those
each other to achieve some sort of goal. The members are often neighbours,
surveyed belong
members of the same community or a church. They agree to put a set amount to savings
of money into the fund stokvels
every week or month. One • 41% belong to
burial societies
of them is appointed to
• 20% belong to
look after the fund, which grocery stokvels
is often put into a savings • 5% belong to
account at a bank. investment
stokvels.
In some stokvels the money The province
with the highest
is taken out once a year penetration
and shared amongst the of stokvels is
members or is used to buy Gauteng at 24%,
closely followed
food which is shared by
by Limpopo at
all. In other stokvels, the 20%, then North
members each get a turn to West at 12% and
take the pool of money. In KwaZulu-Natal at
14%. These four
some stokvels, a member
provinces make up
can withdraw money in 70% of the stokvels
times of need or in order to market.
buy household goods, like
furniture or pay for a burial Community-based saving schemes help people who
or a wedding. do not earn a lot of money.

Activity 13.5 Write a report about stokvels

1. In pairs, discuss why some people prefer to invest in stokvels rather than
banks and the advantages and disadvantages of them doing so.
2. Write a short report on what you discussed. (10)

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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

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.
key words
retirement annuity
Insurance is a form of saving and the insurance companies not only pay their
− saving plan that customers if there is disaster of some sort, but companies who offer retirement
pays out money
annuities also invest their clients’ money in banks and other businesses.
when you retire
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

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 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
• Stokvels are formed by groups of people
Unit 1 Personal savings
who agree to put a set amount of money
• Personal savings refers to the money a
into the fund on a regular basis.
person keeps instead of spending it all.
• This money can be taken out and shared
• Investing means using the money you save
amongst them, used to buy food, or the
to earn more money.
members may each have a turn to take the
• Saving and investing are important to help
pool of money.
people, families and businesses have a
better life in the future.
Unit 4 Financial institutions and
• Savings are the most important source for
making money in the future and creating
organisations promoting
wealth in the country. entrepreneurship
• Financial institutions are businesses that
Unit 2 Banks provide some kind of financial service,
• Banks are businesses that act as the where people can invest or borrow money.
middlemen between people who want to • Financial institutions include banks and
save or keep their money safe, and people businesses that provide insurance and
who want to borrow money. pension funds.
• Temples and palaces around 2000 BC could • There are many organisations in South
probably be regarded as the first types of Africa that have been started to promote
banks. entrepreneurship and small businesses.
• Then goldsmiths became banks where • They offer help in getting a business
people could deposit and borrow gold. up and running, as well as helping the
• The role of banks is to help keep money entrepreneur to get money to start the
flowing between people and businesses that business.
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.

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 Term 4 Revision

Topic 12 The production process

1. Look at the pictures below and identify whether they are examples of
primary, secondary or tertiary production. (12)

b) c)
a)

d) e) f)

2. List the four factors of production. (4)

3. Look at the pictures below of goods and services. Identify which of these
are goods and which are services. (15)

a)

e)
c) d)

b)

4. Explain the difference between renewable and non-renewable

resources. (4)
5. Explain in your own words the meaning of economic growth. (4)
6. Discuss two strategies that can be used to improve productivity. (4)
7. 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. The youth have realised that they can do things
People set them up to pay for groceries, differently from their parents. While parents
holidays abroad, birthday parties, businesses, belong to a burial society, younger members may
a deposit on a car, or schooling and university instead join birthday or investment stokvels and
fees for their children. see it as ‘I can put down a deposit for a car’.

A recent study conducted by market research As stokvels have evolved, so too has the safe-
company African Response revealed that keeping of money, with members now using
47% of the South African population belongs bank accounts and electronic transfers, says
to a stokvel. Managing Director Mamapudi Sibiya. It is a nest egg that is not sitting at
Nkgadima says their study shows that ‘there are home, where it can be stolen or destroyed in a
811 830 stokvels, with 11.4 million members, fire. It is somewhere safe. And if there is a crisis,
and a total estimated fund value of R44 billion’. the money is easily accessible.

Eunice Sibiya, FNB’s Consumer Education The nature and beauty of stokvels is that it
Programme Manager says: “There will always be encourages savings, something former finance
a need for stokvels, especially in our culture. I minister Trevor Manuel always emphasised South
know of people who’ve achieved their degrees Africans needed to do to boost the country’s
from stokvel money. Their mothers would have economic growth, says Sibiya. “We’re really
been domestic workers and saved like nobody’s lacking badly in savings in South Africa. I think
business, with dreams of their children going stokvel accounts make up for it. It encourages a
to university. People have also managed to start saving culture and instills discipline.”
businesses from stokvel money.”
But there are some things that work against
Increasingly, stokvels have found their place mainstream banks, argues Motshegoa. When
among the youth, says Motshegoa. “Some may someone dies, stokvels are more approachable
no longer have their parents around. Perhaps and the turn-around time is quicker. Banks need
some have had to become parents overnight a death certificate as proof. Stokvels don’t need
to take care of their siblings. So they need that the paperwork – they know the person who has
stability,” says Lebo Motshegoa, director of died and understand that families are grieving.
Foshizi, a black consumer insights agency. “It
“Banks also don’t offer friendship, brotherhood
is also a disciplined way of saving because they
and community. With stokvels, people chat
are accountable to other people.”
and know about each other’s lives,” explains
Nkgadima says parents are also making a point Motshegoa. “Stokvels are about more than just
of inviting their children to join in stokvels. 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. Why is it important for people to try and save money? (2)
2. Why are stokvels good for the South African economy? (3)
3. Give two examples from the case study that show how stokvels have
helped improve the lives of people. (4)
4. Name two kinds of stokvels whose members are usually older people and
explain what these stokvels do. (4)
5. 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)
6. Why do some people enjoy saving their money in a stokvel rather
than a bank? (2)
7. Why do you think that more and more stokvels are using the services
offered by banks? (3)
8. Explain whether you think stokvels can help encourage entrepreneurship
in South Africa. (4)
Total [25]

179
 Glossary
credit card a type of bank card which allows
A
the holder to borrow money in order to
accounting records books or records that are make payments
drawn up by a business or person to keep track current account a bank account used for daily
of all their transactions and business deals transactions, also called a cheque account
advertising a tool used to promote your business
annual yearly D
Apartheid a system of discrimination in which debit card a type of bank card which allows the
black people in South Africa were unfairly holder to use money that they have already
treated and prevented from taking part in deposited in the bank to make payments
the economic life of the country deficit the extra amount of money you need when
assets possessions that are used to run a business your expenses are more than your income
ATM a machine at a bank or near shops that deplete keep using something until there is
you can use to withdraw cash at any time of nothing left
the day or night deposit put money into the bank account
depositor person who leaves money for
B
safekeeping
bank card a piece of plastic with particular durable lasts for a long time and is not easily
characteristics issued by a bank which allows broken or used up
the holder to make payments and conduct
electronic banking E
barter trade that takes place without money; goods economic growth an increase in the level of
and services are exchanged for one another economic output over time
budget a money plan to make sure you do economic inequality the gap between the rich
not spend more than you earn; a table or and the poor
spreadsheet that shows the amounts of economic problem having unlimited needs and
expected income and expenditure for a wants but limited resources to satisfy them
month for a business or individual economics the study of needs and how to
buying also called purchasing the raw materials satisfy them
and equipment needed to run a business effectively choosing the best option to get what
you need at the best price at the right time
C
effectiveness how well the task is done
calculated risk making a decision even though efficiency the speed with which a task is done
you know there is a risk involved efficiently getting the best results from what
capital what the owner puts into their business; is available with the least possible waste in
the man-made objects that are used in the time and materials
production process enterprise another name for a business
cheque a written instruction to a bank entrepreneur an individual with skills who
ordering them to pay a certain sum of starts, owns and manages businesses
money to the person named on the cheque epidemic a large number of people falling sick
collective belonging to everyone with the same disease at the same time in a
community a large group of people who live or particular community
work together equipment assets like machines that are used in
compensation money that is paid out after a the operation of a business
loss has been suffered ethnically decorated an African design with
constitution all the laws governing a country ethnic patterns and animal themes
consume to use up or finish evaluate to study something carefully to see
consumer a person or business that consumes whether it was successful or not
credit buy now and pay later expenditure the money you spend

180
expenses costs that a person or business has to electricity, water and sewage systems) that
pay either in order to satisfy their needs or improve people’s quality of life and make it
to run their business easier to conduct business
expenses running costs of the business inputs the specifications and materials in the
exploitation abuse production process
extract to take out insurance an agreement whereby a company
f agrees to pay for loss of or damage to your
property in return for a monthly fee (there
finances money or funds
are terms and conditions that apply to the
financial records a list of the income and
agreement)
expenses of a business
interest money earned on the money that you
fixed cost a cost that does not change no
save with a bank
matter how many items are made
interest rate the percentage of interest you
formal business regulated or controlled by the
earn on your savings
government in some way
investing taking money that you have saved and
G doing something with it to make more money
goals something you want to achieve in the future investment purchase of property or shares or
goods products that businesses sell, for money saved in the bank in order to earn
example, food and clothing more money
government agency an organisation like Umgeni L
Water, that supplies water to the people
labour the physical and mental effort that
who live and work in Durban; or Eskom, that
people provide to produce goods and
generates electricity and delivers it to the
services
homes and factories of Southern Africa
large business a business that employs more
grant an allowance which means that no
than 200 people
payment is required
listed the company started selling shares on the
H Johannesburg Stock Exchange (JSE)
households groups of individuals (such as liabilities the debts of the business
family members) who live together loan money borrowed from a financial
institution such as a bank
I
inclusion the need to make sure that everyone
M
has access to all necessary services make a profit the act of ensuring that income
income money earned by the business or a (revenue) is greater than expenses
person manufacture to make goods, usually using machines
Income and Expenditure Statement a financial manufacturing business involved in making or
report that is used to calculate the profit or producing goods
loss made by the business market a place where people come together to
indigenous knowledge the local knowledge buy and sell goods
which is unique to a given culture or society market research finding out details about
indirect trade trade that occurs when money is possible customers
used to pay for goods or services market share the part of the market in which
inequality imbalance you sell your goods and services
inequitable unfair marketing ways to increase the sale of something
informal business any business that is not maximise get as much out of something as you can
regulated or controlled by the government media places to advertise or spread news
infrastructure the basic physical structures, medium of exchange an item that is used to
facilities and services (such as roads, make trade easier, for example, notes and
coins; money is a medium of exchange

181
 medium-sized business employs up to 200 people promissory note a piece of paper on which one
micro-enterprise a very small informal business person writes a promise to pay the other
employing less than five people person a certain sum of money at some time
minimise keep as low as possible in the future
money any object (such as notes or coins) that promotion event or campaign to encourage
can be exchanged for goods or services people to buy something
morale confidence and enthusiasm property buildings, homes, offices or land
municipal rates taxes or levies charged by public goods things that the government
towns or cities to pay for the provision of provides which everyone in the community
services like rubbish removal uses, for example a park
N public services services that the government
provides which everyone in the community
natural resources (land) the resources provided
needs, for example water and electricity
by nature that are used in the production
purchase buy
process
need something you have to have in order to Q
stay alive questionnaire list of questions that people
needs analysis research to find out what the answer on a form
needs of the people or community are R
noise pollution noise from traffic, air planes and
raw materials things that are used to make
factories that is annoying and distracting
other goods
non-renewable resources resources that can
recycle reusing waste products
run out and can’t be replaced
renewable resource a natural resource with
O the ability to replace itself through some
operating costs costs of running a business biological or natural process; resources that
P can be replaced and will never run out
resource something that can be used to make
per annum per year
something with or do something with; the
personal savings the money you keep for
things we use to produce goods and services
emergencies or the future
retailer a shop where goods are sold to the public
pollution adding harmful waste materials to
retirement annuity saving plan that pays out
the water, air or soil
money when you retire
poverty to be extremely poor
rural area an area where not very many people
prejudice a negative opinion or judgement
live (low population density) and a lack of
of something or someone made without
infrastructure
knowledge or considering the facts
primary needs our most basic survival needs, S
which include our need for food and water scarce only a small or limited quantity available
(physical needs) and our need for safety scarcity not enough of something
(security needs) secondary needs needs that develop once our
primary sector in this sector natural resources basic primary needs have been satisfied (for
are extracted from the earth example, our social needs and self-esteem
producers people or organisations who make needs)
or develop goods and/or services secondary sector in this sector products are
producing the act of making a product by being manufactured from raw materials
transforming raw materials into goods sectors sections or parts
production the process of taking raw materials selling the act of convincing customers to buy
and transforming them into useful goods the goods and services
and services service business makes a profit from the
productivity how efficiently resources are provision of a service
being used to generate products and services

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services services are provided to customers for technology any machinery, equipment or tools
a fee. They are the non-tangible products developed with scientific knowledge
where a skill is used to meet a customer’s tenant someone who rents a building, house or
need. Examples of service businesses are flat
lawyers, doctors and painters template pattern
shares equal parts of a business that can be tertiary sector in this sector businessess provide
bought by the public services rather than make goods
shebeen unlicenced or unregulated business, trading business makes a profit from buying
often in a private home, that sells alcohol and selling goods
small business employs between 5 and 50 people trading licence a document bought from the
SMME an abbreviation for small, medium and local authorities giving you the right to trade
micro-enterprises in the area
social attitude a way of feeling or thinking traffic congestion when the roads leading in
which exists in a particular culture at a and out of cities are crowded with lots of
particular time. It is a form of prejudice vehicles
which is widely held within a certain society transaction a business deal
socio-economic imbalance a situation where
U
people do not have equal access to resources
source document a record of a transaction that urban area an area where many people live
took place in the business which also has infrastructure
spare extra V
spaza shop small informal shop in a township, variable cost a cost that increases or decreases
often run from a private house or from a depending on how many items are made
wooden container VAT tax paid on goods and services that you buy
specialise to focus on one thing and become VAT vendor registered to charge customers VAT
really good at it which is paid over to the government
standard of living the level of income, wealth,
comfort, material goods and necessities W
available to a person want something you would like to have but do
starting capital money needed to start the business not need
Statement of Nett Worth a list of assets and wealth the value of all goods owned by a person
liabilities wholesaler a business that buys goods in large
subsistence economy a way of living where quantities from manufacturers and then sells
people produce everything they need the goods to other shops or customers in
themselves smaller quantities
suppliers businesses that a business buys items from will a legal document that provides information
surplus more of something than is needed; on what to do with your assets should you
when you have money left over after you pass away
have paid all your expenses withdraw take money out the bank account
sustainability the process of using resources in
such a way that we do not deplete them
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

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 Index
A debt, see liabilities disasters 47–49, 50
accounting 55–56, 64, 72 deficit 80 types of 38–39, 40, 50
advertising 106–107, 114 deposit 60 G
Apartheid 126, 131–33, 141 digital currency/money 8, 11 goals 105, 114
Apartheid laws 131, 141 E goods 16, 23, 25, 26, 30–31, 34,
assets 55–56, 64, 71 57, 151
economic growth
ATMs 11, 170, 171 government agency 25
in South Africa 154–55, 163
grant 29
B productivity and 158,
H
bank accounts 60, 61, 66, 67, 161–62, 164
health epidemics 47, 49, 50
74–75, 170–71 role of technology 159–60,
households 15
bank card 11, 12 164
as consumers 28–29, 34
banking stimulating 154–55, 163
as producers 28, 34
electronic 7–8, 12 economic inequality 126,
internet 170 127–28, 141 I
banks 168–72, 174 economic problem 22, 23 income 57, 64, 72–73, 76,
bartering 2–4, 12 economics 22 79–80, 86
budgets 61, 64, 69, 78–80, education 127, 134, 141 Income and Expenditure
81–83, 84–85, 86 electronic banking 7–8, 12 Statement 123, 124
business(es) 36–39, 40–41, employment 138, 141 indirect trade 12
42–44, 45–46, 47–49, 50 enterprise 39 inequality 126
business budgets 84–85, 86 entrepreneur(s) 68, 150 economic 127–28, 141
business development 139, 141 characteristics 93–95, 99 social 128, 141
business expenses 72, 76 definition 26, 91–94, 99 in South Africa 129–30, 141
business income 72, 76 functions 96–98, 99 influx of people 137, 141
buying 96–97, 99 promoting 139, 141, 174, 176 informal businesses 36–37, 50
skills 93–95, 99 advantages/
C
Entrepreneurs’ Day 102, 108, disadvantages 37, 42–43, 50
call deposits 61, 64, 67 116–23, 124 as consumers/producers 45,
capital 55, 64, 120, 124, 150 epidemics, see health 50
cheque account 60, 64 epidemics effect of epidemics/natural
coins 6, 12 expenditure 79–80, 86 disasters 47–49, 50
community needs 15–16, 23 expenses 57, 69, 72, 76 types of 38–39, 40, 50
community savings infrastructure 130, 138, 140,
schemes 173, 176 f
141
compensation 48 factors of production 150, 163
inputs 96, 150, 163
consumer(s) 25, 27, 28, 30–31, fICA 171
interest 56, 57, 61, 67
34, 101–102, 114 finances 55
interest rate 67
consumer choices 30–31 financial advice 170
internet advertising 107, 114
consumer needs/wants 101– financial institutions 174, 176
internet banking 170
102, 114 financial records 62, 64, 98
insurance companies 174, 176
cost calculations 110–11, 114 fixed costs 12, 110, 111, 114
investment 74–75, 76, 78, 166,
costing 110–13, 114 fixed deposits 61, 64, 67, 75
176
credit 56 foreign exchange 170
credit card facilities 170 formal businesses 36, 38–39, 50 J
currency 7, 8, 11 advantages/ job creation 139–40, 141
current account 60, 64 disadvantages 42–43, 50 L
as consumers/producers 45,
D labour 150, 163
50
debit card facilities 170 laws, Apartheid 131, 141
effect of epidemics/natural

184
liabilities 56, 64, 71 promissory notes 6, 12 socio-economic imbalance 126
loss 58, 64, 72, 76 promotion 106 socio-economic inequality 129–
M property 67 30, 141 (see also inequality)
public goods 16, 23 (see also source document 63
manufacturing 40, 140, 141
goods) spaza shops 40
market research 116–17
public services 16, 23, 138, 141 standard of living 16, 128
market share 31
(see also services) starting capital 120, 124
marketing 106
R statement of net worth 71, 76
media 106, 107
stokvels 173, 176
media advertising 107, 114 racism 127
subsistence economy 2
medium of exchange 9, 12 rand (SA currency) 7
suppliers 56
micro-enterprises 39 raw materials 96
surplus 2, 12, 79, 80, 108
money 5–11, 12 recycling 32–33, 34, 103, 114,
sustainability
N 153
of jobs 139–40, 141
reduce (recycling) 32, 34, 153
natural disasters 47–49, 50 of resources 152–53, 163
re-engineer 33
natural resources 150, 163 SWOT analysis 104, 114
renewable resources 21, 152,
needs 14–22, 23, 32–33, 34, T
163
101–102, 114
rent, property 67 target market 106
needs analysis 101
resources 21–22, 23, 101, 150, tax 34, 36, 38
nepotism 128
152–53, 163 technology 159–60, 161–62,
net worth, statement of 71, 76
return (recycling) 33 164
non-renewable resources 21,
reuse (recycling) 32, 34, 153 tenant 67
152, 164
rural areas, challenges 36, 138, trading business 40
notice deposits 61, 64, 67, 75
141 trading licence 38
O S traditional societies 2–4, 12
operating costs 26 transactions 63, 64
salaries 66
outputs 150, 151, 163 U
saving schemes 173, 176
P savings 74, 76, 86, 166–67, 179 unemployment 138, 139, 141
paper money 7, 12 savings account 61, 64, 67, urban areas 136–37, 141
pension companies 174, 176 74–75, 77, 170–71 V
personal expenses 69, 76 scarcity problem 21–22, 23
variable costs 12, 110, 114
personal income 66–70, 76 sectors (in business) 36
VAT 38
personal savings 166–67 security, banking 8, 11, 12
VAT vendor 38
poverty cycle 134 selling 97, 99
poverty trap 134, 141 selling price 112–13, 114, 120, W
pricing 120, 124 124 wages 66
producers 27, 30–31, 34, 45, service business 40 wants 14, 20, 21–22, 23, 30–31,
50 services 16, 23, 25, 26, 30–31, 34, 101–102, 114
producing 97, 99 34, 57, 151, 170 wholesaler 38
production 146–49, 150 sexism 127 will 127
production process 147–49, shares 39 withdrawal 60
150–51, 159–60, 163 shebeens 40
productivity 156–57, 158, skills training 134–35, 141
161–62, 163, 164 small business 10, 39
profit 58, 68, 72–73, 76 SMME 39
profit/loss calculations 122, 124 social inequality 126, 128, 141
profit-making 98, 99 socio-economic challenges
137–38, 141

185