Question grants to the impoverished and building economically enabling

Question 1

You are currently
conducting research on the provision of raw water to south Africa wholesale
buyers including Municipalities and Large commercial players using your
understanding of the Demand and Supply curve, explain and illustrate
diagrammatically how the increase demand would affect the Supply and Price of
raw water.

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Assuming a perfectly competitive
market.

 

The demand and supply curve it is one of the fundamental
principle and it provides a foundational frame work in how to assess the
actions of an economy. Demand is the quantity of a good or service the buyers
are willing to spend at a particular price. Meanwhile price a result of the
constant tug of war between the demand and supply.

 

As
the price of a good increases the quantity demand of the good falls and the
price of a good decreases, the quantity of the good rises. The south African
population in 1994 was about 34 million and the number kemp on increasing
annually in 2016 it was estimated at 55 million according to stats S.A then it
means that the population has increased by 21 million over the years so would
be the demand for the supply of water.

 

 

 

 

 

 

 

 

 

 

An
increase of demand of water represented by a right ward shift of the demand
curve will result in an increase in quantity from Q3 – Q4 and the price of the supply
increases as well from P4 – P6. The price of the water increases due to an
increase in the quantity demanded of the water thus ceteris paribus, and the
price moves along the supply curve. (Makovha D. d., 2017)

 

Question 2

Highlight and Explain some of the factors that may have
caused the supply and demand curve to shift in South Africa since 1994.

 

One
of the factors that affected the supply and demand to shift is the price that
affected demand, Willingness to buy suggest a desire, Economists call this
tastes and preferences, in this case it was the need rather than the want
people needs water to survive.

 

Ability
to purchase water suggest that income is important, prices of related goods can
affect demand as well, the size and composition of the population can affect
demand.

The
more children a family decides to have the greater their demand for water
consumption, and the greater for the market to supply the increasing population
with water and we also need to apply the ceteris paribus assumption, which
means behind a demand and supply curve is that no relative economic factors
other than the water’s price are changing. (openstax cnx, 2016)

 

 

 

 

 

 

 

 

 

 

Question 3

Given the reality of scarce financial resources, what
proposal would you make between the two choices of S.A as a nation faces
between distributing social grants to the impoverished and building
economically enabling infrastructure.

 

South
Africa is borrowing country, unfortunately our state revenues are declining and
the economy has slowed to a crawl according to news 24 2018-01-08.

 

I
would choose to economically enabling infrastructure, because the more we
concentrate on improving our infrastructure the greater we increase our chances
of getting more investments in the country, this will also increase employment
because the government will have to allocate more tenders construction companies,
which this companies will have to employ more none skilled and skilled labours
and this will improve the high unemployment rate the country is facing.

 

Graduates
will get in-service training on this companies in their field of careers, which
will increase their chances of being permanent employees in future by giving
them experiential training and this would be good news for South Africa. when
more people are employed it means more revenues for the government in
collecting taxes and paying off our 50 billion short fall with the SARB. Our
GDP will increase because will not only hire engineers, architecture, project
managers etc. But also unskilled workers will be employed to do manual work
which needs supervision from the skilled workers.

 

This
will reduce drastically the number of people who depend on the social grants
because of the unemployment rate at the moment in the country.it will also
reduce the high bill of the health sector which is funded by the government
because the more you have women who work for themselves instead of opting to be
sex workers forced by circumstances of not knowing where the next meal will
come from for their families. This will reduce the high epidemic of HIV/Aids
transmission. The more women working the more they can make their own choices
in regard to their lives. (associates, 2015)

 

Question 4

Given the option of either sending your child to a
private school or ensuring they were on discovery medical aid, which one would
you choose? Explain your reasoning

 

Our
children are mostly our pride and joy and there is absolutely nothing a loving
parent wouldn’t do for their off-spring. They are also the future and leaders
of tomorrow.

 

I
would choose to send my child to a private school because I believe that we
need to give our kids the best education they deserve so that they can be able
to compete with the other kids of the rest of the world in future. I believe
that giving them the best education will open doors that were closed for them
and giving them the best education will improve their chances of becoming
whatever they want to be and they can add value to the economy of their country
of birth when they are successful, most Government schools don’t give our kids
the best education they deserve, they are mostly over crowded in the classrooms
and even if the child does not understand the subject the teacher wouldn’t
notice immediately up until their write a test.

 

That
is why we have a high number of public school that don’t pass their matric with
a bachelor’s degree which qualifies them to go to any university of their choice.
Sending my child to the private school I would be giving them a fair chance in
life of becoming the best of what they could be without limitations.

 

Though
this private schools causes an arm and a leg I would sacrifice the discovery
medical aid payments to give my child the best investment in so that he or she
could be able to face the world. (ww.google.co.za, 2017)

 

 

 

 

 

 

Question 5

South Africa’s Economy has been criticised as having a
monopoly/oligopoly characteristic in certain key sectors by a number of
influential organizations including the world bank and the International
Monetary Fund. List three sectors that you perceive as operating in a
Monopolistic/Oligopolistic fashion in South Africa. Explain how this has translated
itself in terms of product pricing, the level of competition, quality of
service etc. where applicable your research should detail instances of cartel
like behaviour investigated by the competition commission.

 

Monopoly
firms is the only seller of a good or services where is no close substitutes,
and Oligopoly is a market dominated by a small number of strategically
interdependent firms, and most of the times this companies they try to control
prices or supply of a commodity. (Makovha, 2017)

Multi
choice (DSTV South Africa) was investigated by the independent communications
authority of South Africa (ICASA) has published its inquiry into subscription based
television broadcasting services. The objective of the inquiry is ultimately to
determine whether there are competition issues in the sector and whether ICASA
needs to step in and impose new pro-competition conditions. The enquiry was
based on a number of questionnaires that were sent to the relevant stakeholders
and forms part of an initial analysis which ICASA has opened for comment, in
addition to traditional TV based subscription services such as DSTV, other
streaming services such as Netflix and Show max also formed part of the
enquiry.

Speaking
specifically on  paid for television
subscriptions, the regulator said it is concerned about the uncompetitive
nature in which it had first- access to the certain shows, its exclusive rights
to sporting events such as (cricket, rugby and soccer)  and the high barriers of entry into the
paid-for space and whether certain companies have a monopoly.

ICASA
proposed to enforce on these Monopolistic companies shortening exclusive
contracts.  Long term contract in the
market for the acquisition of premium content is input fore- closure; whoever
wins an exclusive contract forecloses competitors from accessing the content as
way of limiting the harm to competition created by long-term contracts their
duration should be reduced. ICASA proposed that contracts may not be concluded
for longer than five years. (Bussines
Tech, 2017 )

 

Eskom
falls under this monopoly/Oligopoly firms because they are the only largest
company in South Africa that generates Electricity for the nation, Eskom is the
player, Referee and lines man in the energy Sector. It cost the country
billions with its electricity cuts during 2014-2015 because of poor maintenance
of  their power stations, extra –ordinary
measures are needed to prevent power failures but Eskom will not enable this by
letting go of its monopoly on power 
generation. (Timesline, 2010)

Transnet
owns and operates all eight commercial ports and 16 cargo terminals across
Africa’s largest economy, including the biggest container terminal at Durban
and Africa’s largest coal port at Richards Bay. Income from ports and terminal
is account to 42 percent of Transnet’s earnings before interest. Transnet
presses ahead with a 300 billion rand investment plant to upgrade and expand
port and rail infrastructure, the company is charging different prices for bulk
and container goods because of the tariff structure that was set many years ago
and they are unable to change it. (Business Report, 2013)

Question 6

What are the challenges faced by
smaller and medium sized business when larger dominant players engage in Cartel
like activities?

Oligopolists
normally collude by entering into arrangement, agreement or understanding to
limit competition for smaller and medium sized emerging firms in the industry
and maintain high levels of profiting by themselves in the long run. Sellers
can for example agree to charge the same prices for certain product, to grand
uniform discounts, or to limit their marketing and distribution to certain
regions.

A
specific agreement among competitive firms to shorten output, to set prices or
to share the market, is called a Cartel. The purpose of the members is to
operate in a particular market as a shared monopoly. The classic example in
South Africa is the cartel between the three major cement producers, Pretoria
Portal Cement (PPC), Anglo Alpha and Blue Circle, which together account for
more than 90 percent of the total cements sales in the country. These three
firms have long colluded on price setting and market share and were given
official permission to continue colluding, even after the practices concerned
were prohibited in 1988. In October 1994 however, Government withdrew this
permission and gave the cartel until the end of September 1996 to wind up its
affairs.

Monopolistic
competition, however in contrast to monopoly, entry is possible and the mere
threat of possible entry by new firms may be as effective in disciplining  Oligopoly as actual competition would be .
The fact that the market is dominated by a few large producers does not mean
that there is little or no competition under Oligopoly. Competition is often
intense, although it tends to be none – price competition, rather than price
competition (which they tend to avoid). The more intensely oligopolists
compete, the closer they are likely to come to perfectly competitive output. (Philip Mohr)

 

Question7

From a production and efficiency
perspective explain why it is more efficient for Mercedes to manufacture 200
000 C class vehicles, rather than 20 000 E class vehicle per annum? Make
specific reference to variable costs, fixed costs, Total costs and General
economics of scale.

 

Variable costs is costs of production
that vary as output changes costs of labour materials, Fixed costs is costs that remain constant as output varies for an
example rent on premises and Total costs
is costs of production that vary as output changes costs of labour or material
. (Makhovah, 2017)

 

 

Fixed
cost of C class Mercedes = R 558 598, 00 x 12Months

                                                =
R 6 703 176,00

 

Fixed cost of E class Mercedes = R 766 700, 00 x
12Months

                                                =
R9 200 400,00 (New Mercedes-Benz C-Class Specs & Prices in South Africa – Cars.co
…)

 

Total
cost of C class Mercedes annually = 200 000 x 6 703 176.00

                                                            =
R1.4 billion

Total
cost of E class Mercedes-Benzes = 20 000 x 9 200 400, 00

                                                            =
R184 million

Variables
in this case will depend on the production and efficiency of how many annually
Mercedes-Benz produces according to the calculations above it would be cheaper
and it makes economic sense for Mercedes to keep producing more of the C-class
Mercedes as it bring s a healthy profit than the E class Mercedes because it is
what they are best at it.

 

 

 

 

 

 

 

Question 8

Based on your observation on the
above question, what would you propose South African companies to take in order
to compete in the manufacturing space with Chinese companies who have much
greater scale and much larger domestic market?

China
has essentially treated Africa with far more dignity than the western
countries. It treated Africa not as continent in need of saving or lecturing
but as partners in a long term business deal, South African should do the same
to the suffering neighbouring countries in our continent. China strikes
business deals that exchange loans, infrastructure aid and goods in exchange
for African commodities, political support and access to its vast emerging
markets, while leaving Africans alone finding solutions to their problems,
South Africans should stop loose thinking, loose taking and loose doing and
start implementing the good solutions that we know we should because China or
any other country is not going to do for us.

China
does not stay away from countries with poor governance in terms of property
right and rule of law, while western investors tend to stay away from countries
with weak governance. China takes risks which rewards it with more business
opportunities, we should go back to Thabo Mbeki’s style of attracting investors
in Africa not only in south Africa this would open doors for us to manufacture
even in other continents of Africa.

What
we should learn or take from Chinese companies is that they act very fast by
working 12 hours a day six days a week as a norm, while S.A companies usually
care about work life balance and will never match the speed of china if we
don’t change our mind set. The healthy competition can work in our advantage to
defend and grow our role as a gate-way to other African countries because will
no longer take our manufacturing skills for granted in future.

South Africa is very rich in natural mineral resources
with a considerable presence of diamonds, Gold, Silver, wood and aluminium,
Africa is estimated to contain 90 Per cent of the entire world supply of
platinum and cobalt, half of the world’s Gold supply we could invest in opening
sustainable manufacturing companies that will create use of this raw -materials
instead of exporting 90% of it cheaper and buying expensive imports in return
created from them. (Mao, 2017)

The South African automotive and components industry is growing rapidly
and is perfectly placed for investment opportunities. Vehicle manufacturers
such as BMW, Ford, Volkswagen, Daimler-Chrysler and Toyota have production
plants in the country, while component manufacturers (Arvin Exhust, Bloxwitch,
Corning, and Senior Flexonics) have established production bases in the
country.

The industry is largely located in two provinces, the Eastern Cape
(coastal) and Gauteng (inland). Companies with production plants in South
Africa are placed to take advantage of the low production costs, coupled with
access to new markets as a result of trade agreements with the European Union
and the Southern African Development Community free trade area. Opportunities
also lie in the production of materials (automotive steel and components

South Africa’s aim is to become an automotive investment destination of
choice. Modernization and upgrading of key elements in the automotive industry
are required to keep pace to achieve international competitiveness.

Interest rates are currently at historic low levels, reducing the cost
of investments. It is significant to note that most major multinational vehicle
manufacturers are currently represented in SA, which means that international developments
also impact on the country. The outlook for the vehicle industry is bright in
terms of both exports and the domestic market. (Manufacturing in South Africa – Brand South Africa, 2017)

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