The S.A. Economy: Public and Private Sectors

1. 14 The S.A. Economy: Public and Private Sectors

2. Chapter Objectives • Land area an Population of S.A. • Important Facts About S.A. Households and S.A. Businesses • Principle - Agent Issues • Economic Role of Government in the Economy • Categories of Government Spending and the Sources of Government Revenues

3. S.A. Land Area and Population (%) 10 20 30 40 (169 500) Land area per sq/km Eastern Cape Free State Gauteng Kwazulu Natal Limpopo Mpumalanga Northern Cape North West Western Cape South Africa (6 648) Population ‘000 (129 480) (2 902) (17 010) (10 531) (92 100) (10 449) (123 910) (5 227) (79 490) (3 606) (361 830) (1 147) (116 320) (3 450) (129 370) ( 5 356) (1 219 090 sq km ) (49320 million) Source: StatsSA

4. Households as Income Receivers Functional Distribution of Income-2005/6 National Income Received (Percent) 0 10 20 30 40 50 60 70 74% Income from work 1% Income From Capital Income By Function Performed 6% Imputed Rent Social and Insurance Grants 6% 9% Other Income Source: StatsSA

5. Distribution of Household Consumption expenditure 5 10 15 20 25 (%) Food and Bev Alcohol & Tobacco Clothing and Foot Fuels and water Furniture & H Equip Health Transport Communication Recreation & Cultu Education Restaurant & Hotels Miscellaneous Unclassified R8 105 R647 R2 781 R13 245 R3 868 R933 R11 180 R1969 R2 582 R1 356 R1 232 R8 081 R172 Source: StatsSA

6. Distribution of Household Income per decile (Mean rand per annum ) (see also Chapter 11 p – Table 11.1) Food and Bev Alcohol & Tobacco Clothing and Foot Fuels and water Furniture & H Equip Health Transport Communication Recreation & Cultu Education Restaurant & Hotels Miscellaneous Unclassified R405646 R128846 50 40 30 20 10 R69540 R43589 R30534 R22981 R17630 R13300 R9502 R4314 1 2 3 4 5 6 7 8 9 10 Source: StatsSA

7. Households as Spenders Composition of Consumption -2009 0 10 20 30 40 50 60 70 80 90 Durable Goods 7% Semi Durable Goods 9% 44% Services Non- Durable Goods 40% Source: Bureau of Economic Analysis

8. The Business Population • Sole Proprietors • Partnerships • Closed Corporations • Companies • Private • Public

9. Legal Forms of Business Advantages of Companies • Corporate Securities • Stock • Bond • Limited Liability • Hiring of Specialists • Unlimited Lifetime • Principal-Agent Problem 14.1

10. The Public Sector: Government’s Role • Providing the Legal Structure • Maintaining Competition • Monopoly • Regulation • Regulated Monopolies • Competition Commission • Competition Tribunal • Competition appeal board

11. The Public Sector: Government’s Role • Redistributing Income • Transfer Payments • Market Intervention • Taxation • Reallocating Resources • Market Failure • Externalities or Spillovers • Negative or Positive 14.2

12. The Public Sector: Government’s Role • Correcting for Negative Externalities • Legislation • Specific Taxes • Correcting for Positive Externalities • Subsidize Consumers • Subsidize Suppliers • Provide Goods Via Government

13. The Public Sector: Government’s Role • Public Goods and Services • Private Goods • Rivalry • Excludability • Public Goods • Nonrivalry • Nonexcludability • Free-Rider Problem • Quasi-Public Goods • The Reallocation Process

14. The Public Sector: Government’s Role • Promoting Stability • Unemployment • Inflation • Government’s Role: A Qualification • Political Context • Overregulation • Underregulation • Benefits and Costs • Not Perfectly Carried Out

15. Government Finance Expenditures-2010/11 Eigth Areas of Spending (R billions) 0 40 80 120 160 200 R165.1 Education R154.8 Economic Affairs R130.9 SocialProtection R102.1 Health R93.2 Housing & Com R85.6 Order & Safety R33.8 Defence R135.4 Other Source: www.treasury.gov.za

16. Government Finance Government Tax Revenues-2010/11 Basic Revenue Sources (billions) 0 50 100 150 250 300 R230.1 PersonalTax R164 VAT R151.1 Company Tax R31 Fuel Levy R22 Excise Taxes Customs Duties R20.5 Other R29.2 Source: www.treasury.gov..za

17. Ke Nako Last Word • “I think as South Africans, we need to remember that we are a teenager in the world of nations and for us this has been a proud moment since 1994 and from the economic point of view all the investment was money well spent,” Gordhan said at a FIFA press conference.  He is adamant that for South Africa, the tournament’s benefits will not only be seen in terms of economic legacy but could help the country increase its delivery capacity while demonstrating to the world its ability to host major events.  The national government spent more than R33 billion over a period of four years on infrastructure and preparation for the World Cup. Close to R12 billion was spent on stadia infrastructure with another R11 billion spent on transport and R1.5 billion spent on event broadcast and telecommunications. Source: http://www.sa2010.gov.za/node/3330

18. Land area and population Household Income Household spending durable goods nondurable goods Services Legal Forms of Business limited liability principal-agent problem externality negative externalities positive externalities public goods quasi-public goods government purchases transfer payments personal income tax corporate income tax sales and excise taxes property taxes GovernmentExpenditure Key Terms Page

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