Question

QUESTION 1 (20 Marks) 1.1 Discuss some of the features prevalent in the South African economy, during the 10-15 years prior to constitutional change and during the first few years of the then new state. (8 marks) 1.2 Give an overview of the various dimensions of the relationship between the public sector and the rest of the economy. Add to your discussion an outline of how the economy can affect government. (12 marks)

Answer 1

Ans 1. Before the constitutional reform in South Africa

Agriculture and Hunting: Before South Africa became a democratic country with a constitution, its economy was completely dominated by agriculture and hunting.

Close Economy: Their economy was close and very little trade took place between South Africa and other nations in Africa and other continents.

The flow of money: They also had strict rules regarding the flow of their money.

White superiority: During the Apartheid years, the white minority were favored as their ranks had the most skilled laborers in the market.  

Inequality and disparity in income distribution: Due to white citizens being favored, the black races suffered from unfair treatment and there was also the inequality in income distribution.

In the initial period after democracy was formed

Their economy still suffered from poverty, unfair treatment of races, and inequality in income distribution. Unemployment was prevalent all over the nation. And the competitive capacity of the laborers and the manufacturing units was really low in comparison to other continents.

The government encouraged FDI by removing sanctions on foreign investments and the open economy flourished. South Africa experienced an increase in the demand for its commodities and the price surged up. However, the government and the economy had to endure the high volatility of the market.

Ans 2. Relationship between the public sector and the rest of the economy

• Employment: The public sector provides several employment opportunities such as in the defense sector, administration, etc.
• Infrastructure: The public sector works toward infrastructure development and invests accordingly in sectors like agriculture, transport, education, and more.
• Export promotion and Import Substitution: They also need to focus on the promotion of the export around the world and substitution of the import with the domestically produced goods and services.
• Stabilizing volatilities: The economy can experience various adverse conditions such as inflation, recession, depression, etc, the public sector also provide necessary help in stabilizing such situations.
• Equal distribution of income: To not just focus the power in just a few hands, the private sector redirects the resources and the profits to the welfare of the poor people of the society.

The above are the few features that reflect the relationship between the public sector and the economy. The ultimate aim of the public sector is economic growth and development with the welfare of society.

The condition of the economy can direct the government's actions while making decisions regarding various policies and reforms.

For example, if there is inflation in the economy, then the government will either reduce public spending or decrease government expenditure as its fiscal policy.

or

To increase the export, the government will encourage exports by reducing the export tariffs, provide export incentives such as duty-free import of inputs required for the exports, and more.