Economics / Notes Grade 11 Nkangala District/2022

NKANGALA DISTRICT

ECONOMICS NOTES

TOPIC 9: ECONOMIC GROWTH

GRADE: 11

YEAR: 2022

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 Economics / Notes Grade 11 Nkangala District/2022

TOPIC 9: ECONOMIC DEVELOPMENT

 Description: Economic development is the process whereby the standard of living of
the majority of people of people in a country improves over time.
 Economic development considers the improvement in all aspects of human life e.g.
economic aspect (jobs, income) social aspect (education, health, housing,).
 This means for development to happen people should have jobs which allows them to
earn incomes. Education and health facilities should function properly and produce
well educated and skilled people and health facilities should be equipped well to
improve health of people. Majority of people have proper housing with services such
as electricity and water available.
 Therefore, economic development is broader than economic growth.

Differences between economic growth and economic development

Economic growth Economic Development

An increase in a country’s Increase in standard of living over time

production capacity
It is concerned with goods and Concerned with all aspects of human life e.g.
services education, employment, housing, health
It is measured by increase in GDP Measured by standard of living.

It is a requirement for economic It depends on economic growth

development to take place

MEASURING ECONOMIC DEVELOPMENT

 Economic development is measured using methods developed by three organisations
which are: The World Bank, International Monetary Fund and The United Nations.
 The World Bank: classifies countries into four groups according to their gross
national income (GNI) per capita. The groups are:
 High income countries
 Middle income countries
 Upper middle income countries
 Lower middle income countries
 Low income countries

 The International Monetary Fund: classifies countries in to three groups which are:
 Industrial countries
 Developing countries
 Transitional economies

 The United Nations: has developed the Human Development Index (HDI) to rank
countries according to their level of development. the HDI has values 0 to 1. The closer

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 Economics / Notes Grade 11 Nkangala District/2022

to 1 the more developed a country is and the closer to 0 the less developed a country
is. HDI classifies countries into four groups namely:
 Very high human development
 High Human development
 Medium human development
 Low human development
 The Human Development Index (HDI) is reported annually is used to measure the
three human development indicators in a country. Those indicators are a long and
healthy life, knowledge and decent standard of living
 The HDI ranks countries on a scale of 0 (lowest development index) to 1 (highest
development index).
HDI for selected countries
Country HDI rank HDI value, Development
2019 level
Norway 1 0.957 Very high
Australia 8 0.944 Very high
United Kingdom 9 0.932 Very high
USA 17 0.926 Very high
Japan 19 0.919 Very high
Botswana 100 0.735 High
South Africa 114 0.709 High
Egypt 117 0.707 High
India 131 0.645 Medium
Ghana 138 0.611 Medium
Zimbabwe 150 0.571 Medium
Nigeria 161 0.539 Low
Mozambique 181 0.456 Low

 Citizens of countries with very high level of development are able have very high
standard of living, high material wealth and safety in their environments.
 Citizens of countries with low level of development experience low standard of living,
high poverty and low safety in their environments.

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 Economics / Notes Grade 11 Nkangala District/2022

METHODS OF ECONOMIC DEVELOPMENT/ STRATEGIES FOR DEVELOPMENT

 The following strategies can be used to develop a country’s economy.
 Human resource development: Education and training are important to improve skill
levels of workers.
 Skilled workers can be efficient in production of goods and services and often earn
good income.
 Workers motivation should be increased by strategies such as awards and
performance bonuses. Worker Internal motivation can also develop when their work
environment is stimulating.
 Increase in capital formation: investment in capital goods to produce goods and
services is important for development. Participants in the economy should save parts
of their income which will in turn enables banks to give out loans.
 Infrastructure such as roads and communication systems should be developed and
well maintained.
 Foreign capital can contribute to the formation of capital goods in a country.
 Foreign investors can improve the availability of modern technology in a country which
can lead to development
 Best use of natural resources: a country’s natural resources such as land and
mineral deposits should be used productively.
 Minerals can be processed and changed into finished products before exporting.
 This can result in increase in job creation as people will be hired to work in the mines
as well as in the factories processing those minerals.
 National income can also increase as finished products fetch higher price than primary
products.
 Promote entrepreneurship: the country should encourage entrepreneurship, so that
production of goods and services can increase.
 The larger the number of entrepreneurs, the larger the number of jobs created and
therefore, improvement in standard of living.
 Technology: Developing countries can use new technology to improve their
production methods.
 Producers should ensure that technological methods adopted from developed
countries are suitable for their situations

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 Economics / Notes Grade 11 Nkangala District/2022

CHARACTERISTICS OF DEVELOPING COUNTRIES (Possible essay)

 A developing country is a country with low or middle per capita income. Developing
countries have the following characteristics:
 Low standard of living
 Majority of developing countries have low to medium standard of living.
 The level of poverty is very high, as many employed people earn low wages.
 In many cases educational facilities are scarce and children have to walk long
distances to access education.
 The level of education of the majority of developing countries is very low as educational
facilities (such as schools) are limited and poorly resourced.
 There are lack of proper health facilities and this result in low life expectancy.
 Low level of productivity
 The level of productivity of factors of production in developing countries is often low.
 These countries often use low level technological method of production.
 They use labour intensive methods of production which often produce much less than
capital intensive methods.
 There is generally lack of other inputs such as capital goods, experienced managers
and skilled labour.
 Due to poor health, the level of absenteeism of workers is very high and this reduce
productivity.
 High population growth rate and dependency burdens
 Developing countries experience high population growth rate.
 Due to low level of education, majority of people do not believe in family planning and
contraception.
 Availability of medicines (even though not the best in these countries), have managed
to reduce death rates while birth rates are still high.
 High birth rate place a financial burden on these countries’ governments.
 High level of unemployment
 Developing countries have many people who are willing and able to work but have no
jobs (unemployment).
 There are also many people who are under employed, which is when they do less
work than they are capable of doing.
 Example of under-employment include people with part time jobs, seasonal workers
and people who do not work to their full economic potential.
 Both unemployment and underemployment lead to poverty.
 Dependency on the primary sector
 Most developing economies rely on primary economic activities such as agriculture
and mining.
 Agriculture often contribute the most money to gross domestic product and earning of
foreign exchange through exports.
 Agricultural products fetch low price in international market, therefore bring low amount
of foreign exchange.

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 Economics / Notes Grade 11 Nkangala District/2022

 Usually these countries import secondary products (manufactured goods) which are
relatively expensive.
 Many of developing countries struggle to have enough foreign exchange to finance
the importation of secondary products.
 Deficient (Poor) infrastructure
 Developing countries lack sufficient and good infrastructure to achieve high economic
growth and better standard of living.
 Roads and rail systems are poorly developed and therefore negatively affecting
transportation of raw materials and products.
 Too little of electricity is generated by many of these countries, therefore limiting
economic growth and development.
 Internet access is poor in many rural areas and this affect services such as learning,
teaching and banking.

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 Economics / Notes Grade 11 Nkangala District/2022

SOUTH AFRICA’S ENDEAVOURS (Possible essay)

 South Africa’ efforts in increasing economic growth and development include the usage
of the following policies:
 Reconstruction and Development Programme (RDP)
 The policy was introduced in 1994 as a development strategy for the government.
 The main aims were to alleviate poverty and address the inequalities and shortfalls in
social services.
 It focused on job creation through public works, provision of housing, water and
sanitation and electrification.
 It also aimed at creating an accountable and transparent processes for all levels of
government.
 Growth, Employment and Redistribution (GEAR)
 The main strategy was to strengthen economic development, redistribute income and
create socio-economic opportunities for the poor.
 Key elements of the policy were:
 To have an exchange rate policy that can result in stability to the currency
 A consistent monetary policy to prevent an uncontrollable inflation.
 A reduction in tariffs to reduce the costs of inputs and facilitate industrial reforms.
 Tax incentives to stimulate new investments in labour intensive industries

 Accelerated and Shared Growth Initiative for South Africa (ASGISA)

 Its objective was to co-ordinate government initiative to create economic
development. The key elements were:
 Halve unemployment and poverty by 2014.
 Accelerate economic growth to an average of 6% between 2010 and 2014.
 The government had planned to increase public sector investment in infrastructure in
order
 To eliminate the second economy (informal sector) by developing it to the status of
the formal economy.
 National Skills Development Strategy (NSDS)
 It is the main strategic guide for skills development and provides direction to sector
skills planning and implementation in the SETAs.
 It is intended to radically transform education and training in South Africa by
improving both the quality and quantity of training. This can support increased
competitiveness of industry and improved quality of life for all South Africans.
 The National Skills Development Strategy (NSDS) is the tool used by the
Department of Labour to drive the process of developing the skills of the South
African labour force.
 Six conceptual pillars: Inclusion, Relevance, Sustainability, Creativity, Quality and
Quantity inform its key aims and objectives

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 Economics / Notes Grade 11 Nkangala District/2022

 National Development Plan (NDP)

 Its aim is to eliminate poverty and inequality by the year 2030.
 sets out to expand economic opportunities through investment in infrastructure, more
innovation investment and entrepreneurship.
 Small business Development Promotion Programme (SBDPP)
 It was designed to deliver support and services to small, medium and micro
enterprises.
 Department of Trade and Industry (DTI), Industrial Development Corporation (IDC)
and the National Small Business Act offer these services.
 Laws are revised to help change power imbalance.
 Economic Empowerment Programmes (BEE)
 The BBBEE was designed to create economic opportunities for the previously
disadvantaged groups.
 This means the government is creating conditions for increase in businesses that are
owned and managed by black people.

INDIGENOUS KNOWLEDGE SYSTEM (IKS)

 Indigenous knowledge system is local knowledge that is unique to a particular society.
 It is knowledge that has practical applications for the communities’ daily survival.
 It provides culture –fit problem solving solution
 Components of IKS
 Economic component: consists of agricultural activities e.g. crop and livestock
farming, manufacturing of tools e.g. for ploughing and household utensils and services
such as traditional health care
 Social component: consists of education and traditional religious activities.
 Political component; consists of authority structures such as kings, chiefs and
headmen.

IMPORTANCE OF INDIGENOUS KNOWLEDGE SYSTEMS (IKS)

 Local knowledge can help one to understand local conditions
 It can provide suitable strategies for activities aimed at developing communities.
 It offers problem solving strategies for the local community especially the poor e.g.
subsistence farming.
 It contributes to the development process of a country.