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LO3 AS1: Compare and evaluate South African growth
and development policies in terms of international
benchmarks.
 Economic Growth
- the increase in real GDP
- increase in production capacity of the country
- has to do with the increase of goods and services and
comes before economic development
 Economic Development
- process whereby the standard of living of the citizens
of the country improve over time.
- increase in the economic welfare of the poor.
DEMAND – SIDE APPROACH
 Focus on the macroeconomic components within the
economy
 Involves discretionary changes in monetary and fiscal
policies with the aim to increase demand for domestic
goods and services.
 If and increase in local demand it will increase
production of goods and services and economic growth
 An increase in AD will lead to increase in
- consumer demand, investment spending, Govt
spending and net exports
SUPPLY – SIDE APPROACH
 An increase in Demand only will not lead to economic
growth or development
 The country must have the capacity to increase
production when demand increase
 The increase in D depends on availability and quality of
FOP
 The FOP are the supply side factors needed in the correct
quantity and quality.
 Supply side policies focus on supply and its
microeconomic components
Growth And Development Policies
 RDP
= The Reconstruction and Development Programme
 GEAR
= The Growth, Employment and Redistribution
Programme
 AsgiSA
= The Accelerated and Shared Growth Initiative for
South Africa.
THE RDP
 Policy introduced in 1994 with the following aims:
- create a dynamic economy that can create new jobs
- alleviate poverty
- address low wages
- address extreme inequality
- meet basic needs
- address structural problems in the economy that limit
growth
- expand the export potential of South Africa
 Since 1996 this programme has been part of the national
budget and not a stand alone programme
GEAR
Introduced in 1996 – in line with international
macroeconomic best practice
 Gear stressed the need for market-led growth, fiscal
and monetary discipline and investor confidence
 The main aims of GEAR:
- budget reforms – increase spending on service
delivery to the poor
- fiscal reduction - reduction in the overall budget
deficit and govt borrowing
- consistent monetary policy to contain inflation
- relaxation of exchange controls – stimulate investment
- skills development – through a skills levy.
- expansion of the infrastructure – improve service delivery
- expansion of trade and investment in Africa
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
To ensure sustainable economic growth and development
AsgiSA
 Due to problems in achieving the objectives of RDP and
GEAR, AsgiSA was introduced in 2006
 The main principle to achieve economic development
through economic growth
 The following areas targeted:
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Infrastructure development
- Govt to invest about 8% of GDP on infrastructure
- Increase power supply, transport network and electronic
communication
Investment in specific sectors
- improve production capacity
- Three sectors: outsourcing, tourism, bio-fuels
AsgiSA (cont)
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Education and skills development
- address shortage of professional skills in SA
- introduce new curriculum – National Skills Development
Strategy etc
Eliminating the second economy
- poor find them in this economic – informal sector
- address issues – finance, preferential procurement, SMME
development
Macroeconomic issues
- mentioned in GEAR
Governance and Institutional interventions
- keeping interventions to a minimum
- focus on improving efficiency
The Evaluation of SA’s Policies

Growth Policies
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Economic Growth
- SA a developing country – Middle income country
- Av growth rate 3%
- Budget deficit 3% of GDP (Benchmark)
Inflation
- Inflation target 3-6%
- Interest rate main instrument to control inflation
- Stable budget has also stablise inflation.
Employment
- Employment in non-agri sect decreased
- Gear used to increase employment
- Productivity increase by 4,2% over past 10 years
- Unemployment increased from 14 – 27% in 2006
Exchange rate stability
- Currency depreciated from 1994 – appreciated in 2005
- Reserves increased from 3% in 1994 to 19% in 2005
The Evaluation of SA’s Policies (cont)

Development Policies
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Macroeconomic policies
- successful implementation important for poor and rich
- increase in per capita GDP means improvement in
standard of living
- redistribution through tax system successful
Microeconomic policies
- employment in the different sectors increased by 32%
Social polices
- 34,1% of SA population is poor ($2 per day)
- poverty reduction serious and focuses on basic needs for
poor.
Redress
- empowerment of indigenous people of developing countries
- SA passed both empowerment and affirmative acts
The Evaluation of SA’s Policies (cont)
 Development policies
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Black Economic Empowerment (BEE)
- legal transformation of the SA economy
- speed agreed between government and various industries
- DTI published scorecard to measure progress
Land redistribution and restitution
- Govt redistribute 30% of Agr Land to previous disadv
groups
- By 2004 1,5% of agr land distributed
- 61% claims for lad restitution finalised
Affirmative action
- as per Affirmative Action Act
- applies to employers with 50 and more employees
North – South Divide
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Refers to the gap between developed (Northern hemisphere) and
developing countries (Southern hemisphere)
Unequal standard of living
- described by three indicators
The North
The South
Per capita income
Is home to 35% of
world’s population and
creates 87% of world
income
Is home to 65% of
world’s population and
creates 13% of world
income
Life expectancy
Is about 70 years old
Is about 50 years old
Education
-Well educated
-Secondary school
level
-Low education levels
- low adult literacy
North – South Divide
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Globalisation Inequalities
- have the following problems:
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Poverty
- growing gap between the rich and poor
- number of poor have increased in Africa only
Growth
- still have difficulty in attracting FDI
Trade
- rich countries subsidise production of agr goods
- difficult for developing countries to compete
Environment
- Northern countries burn huge amounts of coal and fuel.
- Green house gases given off
- Cause much pollution
- Southern Countries – agricultural- degradation and depletion of
land
- Inability to produce enough food – malnutrition and hunger.