Compiled by Christo van der Rheede on behalf of

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Creating and sustaining an environment conducive
for business growth, human development and higher
wages!

• Compiled by Christo van der Rheede on behalf of
• AHi Business Network

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The Four Factors of Production

• Economic resources are the goods or services
  available to individuals and businesses used to
  produce valuable consumer products.
• The classic economic resources include land,
  labour and capital.
• Entrepreneurship is also considered an economic
  resource because individuals are responsible for
  creating businesses and moving economic resources
  in the business environment.
• These economic resources are also called the
  factors of production.
• The factors of production describe the function
  that each resource performs in the business
  environment.

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The Four Factors of Production

• Land
• Land is the economic resource encompassing
  natural resources found within a nations
  economy. This resource includes timber, land,
  fisheries, farms and other similar natural
  resources. Land is usually a limited resource for
  many economies. Although some natural resources,
  such as timber, food and animals, are renewable,
  the physical land is usually a fixed resource.
  Nations must carefully use their land resource by
  creating a mix of natural and industrial uses.
  Using land for industrial purposes allows nations
  to improve the production processes for turning
  natural resources into consumer goods.
• Labour
• Labour represents the human capital available to
  transform raw or national resources into consumer
  goods. Human capital includes all able-bodied
  individuals capable of working in the nations
  economy and providing various services to other
  individuals or businesses. This factor of
  production is a flexible resource as workers can
  be allocated to different areas of the economy
  for producing consumer goods or services. Human
  capital can also be improved through training or
  educating workers to complete technical functions
  or business tasks when working with other
  economic resources.

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The Four Factors of Production

• Capital
• Capital has two economic definitions as a factor
  of production. Capital can represent the monetary
  resources companies use to purchase natural
  resources, land and other capital goods. Monetary
  resources flow through a nations economy as
  individuals buy and sell resources to individuals
  and businesses. Capital also represents the major
  physical assets individuals and companies use
  when producing goods or services. These assets
  include buildings, production facilities,
  equipment, vehicles and other similar items.
  Individuals may create their own capital
  production resources, purchase them from another
  individual or business or lease them for a
  specific amount of time from individuals or other
  businesses.
• Entrepreneurship
• Entrepreneurship is considered a factor of
  production because economic resources can exist
  in an economy and not be transformed into
  consumer goods. Entrepreneurs usually have an
  idea for creating a valuable good or service and
  assume the risk involved with transforming
  economic resources into consumer products.
  Entrepreneurship is also considered a factor of
  production since someone must complete the
  managerial functions of gathering, allocating and
  distributing economic resources or consumer
  products to individuals and other businesses in
  the economy.

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The Heartbeat of Production

• The entrepreneur is the heartbeat of production.
• Without the entrepreneur willing to risk capital,
  innovatively transforming economic resources into
  consumer products, employing labour there can be
  no production.
• Government relies on the entrepreneur to create
  businesses and employment.
• Contribution to GDP by private entrepreneurs
  amounts to 83.
• Contribution to GDP by the state amounts to 17.
• Job creation by private entrepreneurs amounts to
  72.
• Job creation by the state amounts to 18.

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The Heartbeat of Production

• The 2014 Global Risk Report by the WEF stated
  that South Africa had the highest unemployment
  rate in the world for people between the ages of
  15 and 24.
• Statistics South Africa also stated that the
  unemployment rate amongst the same age group had
  increased form 32.7 in 2008 to 36.1 in 2014.
• Government responded by providing Youth Subsidies
  to the private sector amounting to R2 billion to
  employ young people.
• High youth unemployment has a negative impact on
  economic growth and productivity.
• It leads to reduced GDP and increases the
  economic cost due to increased reliance on social
  grants.

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The NDP on the Crucial Role of the Entrepreneur

• Small- and medium-sized enterprises will play an
  important role in employment creation. According
  to the Finscope (2006) survey, 90 percent of jobs
  created between 1998 and 2005 were in small,
  medium and micro enterprises.
• Despite this, total early-stage entrepreneurial
  activity rates in South Africa are about half of
  what they are in other developing countries.
• A growing economy, rising employment and incomes,
  falling inequality, an improving education
  system, fertile conditions for entrepreneurship
  and career mobility will contribute significantly
  to uniting South Africas people.

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The NDP on the Crucial Role of the Entrepreneur

• Programmes such as affirmative action, black
  economic empowerment and land reform are most
  effective when the economy is growing and the
  education system is improving.
• Without such an environment, these measures can
  raise the level of social tension.
• It is important that we all have a common
  understanding of the need for more
  entrepreneurial entities and a common
  appreciation on how it works.

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The Crucial Role of the Entrepreneur

• It is important that we all have a common
  understanding of the need for more
  entrepreneurial entities and a common
  understanding of how it works.

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The Entrepreneurial Entity

• Entrepreneurial entities are made up of many
  administrative and management functions,
  products, services, groups and individuals.
• Various inputs informed by elements like the
• vision, mission (nervous system),
• values (human senses system),
• employees and employer/s (hands and fingers),
• direct and indirect costs (respiratory system),
• products or services (cardiovascular system),
• administration (muscular system),
• resources (digestive system),
• marketing (skeletal system),
• safety and security (lymphatic system),
• networking (reproductive system), and
• monitoring, evaluation (legs and feet)
• are processed to produce certain outputs, which
  together, accomplish the overall desired goal for
  the agricultural entity.

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The entrepreneurial entity

• The previous diagram outlines the operational
  elements of a complex system such as an
  entrepreneurial enterprise.
• Entrepreneurial enterprises operate as an
  organised whole.
• All the elements that make up this whole are all
  intimately connected.
• For entrepreneurial enterprises to operate
  effectively and efficiently it is important that
  a holistic and integrated governance and
  management approach is followed.
• According to systems theory a system is an
  organized collection of parts that are highly
  integrated to accomplish an overall goal.

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The entrepreneurial entity

• A high-functioning system like an entrepreneurs
  entity continually exchanges feedback among its
  various parts to ensure that they remain closely
  aligned and focused on achieving particular
  outcomes such as
• profitability,
• sustainability,
• competitiveness,
• expansion and
• progressive realisation of employee development
  and job security.
• If any of the parts or activities of an
  agricultural entity seems weakened or misaligned,
  the entity makes necessary adjustments to more
  effectively achieve its goals.

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Creating Conducive Circumstances for the
Entrepreneur

• The NDP proposes a multidimensional framework to
  bring about a virtuous cycle of development, with
  progress in one area supporting advances in
  others.
• How will this work in practice?
• South Africas principal challenge is to roll
  back poverty and inequality.
• Raising living standards to the minimum level
  proposed in the plan will involve a combination
  of increasing employment, higher incomes through
  productivity growth, a social wage and
  good-quality public services.
• All of these challenges are interlinked. Improved
  education, for example, will lead to higher
  employment and earnings, while more rapid
  economic growth will broaden opportunities for
  all and generate the resources required to
  improve education.

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Multidimensional framework to bring about a
virtuous cycle of development

• In terms of this diagram a vibrant and growing
  rural economy does not just happen.
• It is the end result of various strategic
  interventions and cultivation of specific
  fundamentals such as economic
• organisation,
• co-operation,
• innovation,
• networking,
• empowerment,
• rule of law,
• entrenching and expanding private ownership,
• service delivery,
• competitiveness and
• sustainability and commitment to specific ground
  rules and values that bring about growth and
  development.
• These ground rules and values are outlined in
  various progressive constitutional, institutional
  and legislative frameworks such as the National
  Constitution, the Millennium Development Goals
  (MDGs) and the National Development Plan.

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Multidimensional framework to bring about a
virtuous cycle of development

• Countries are caught up in a virtuous cycle of
  development (human development and economic
  growth goes hand in hand) or vicious cycle of
  human underdevelopment and economic stagnation
  and even decay).
• From a development perspective, the desirable
  category to be in is, of course, the virtuous
  cycle of development.
• A virtuous cycle of development drives Human
  Development and Economic Growth simultaneously.
• Given appropriate economic policies, improved
  Human Development then allows a transition into a
  virtuous cycle.

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Multidimensional framework to bring about a
virtuous cycle of development

• China is a country that moved from a vicious
  cycle position which obtained before the 1950s to
  an Human Development -lopsided one in the 1960s,
  and then to a sustained virtuous cycle.
• From 1979 onwards there followed a series of
  economic reforms and growth accelerated,
  supported by the high levels of Human Development
  that had been achieved earlier. From then on,
  China entered and remained in a virtuous cycle.
• Nigeria represents a case illustrating a fall
  back from Economic Growth -lopsided to vicious
  cycle performance. Nigeria experienced Economic
  Growth -lopsided development in the 1960s and
  early 1970s, and fell back into a vicious cycle
  thereafter.
• Her development has been dominated by three
  factors political instability, domination of the
  political system by the military for much of the
  time, and the emergence and then dominance of the
  oil industry.

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A minimum wage as a human development and
economic growth imperative

• A minimum wage serves is a human development and
  economic growth imperative.
• We must however guard against a one shoe fits
  all approach in the South African context given
  the already high unemployment rate and the low
  levels of anticipated economic growth.
• Statistic South Africa in its latest Quarterly
  Labour Survey states that out of a working age
  population 35,8 million people, 15,5 million
  employed, 5,5 million unemployed and 14,8 million
  are not economically active.
• Thus resulting in an unemployment rate of 26,4.

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A minimum wage as a human development and
economic growth imperative

• The AHi is of the opinion that wages should
  indeed be regulated in a context such as that in
  South Africa, but the level at which minimum
  wages are set should take into account the likely
  negative effects on employment.
• The AHi is also of the opinion that such wage
  regulations should focus on sectoral minimum
  wages.
• What the level should be should be a matter of
  sectoral research and bargaining.
• Minimum wages present one of the most difficult
  choices to any policymaker concerned with
  poverty, inequality and unemployment.