Reference no: EM133385150

Question 1

‘How load shedding is tearing through South Africa's economy'

The latest high-level rolling blackouts in South Africa are taking its toll on various fundamental sectors of the economy. The country's economy is facing an unprecedented scenario with load shedding not only impacting food security and mobile networks, but business sectors and industries at large.

Stats SA reported that the country's gross domestic product decreased by 0.7% in the second quarter of 2022 - much of this decline was attributed to rolling blackouts which hobbled economic output.

The Bureau of Economic Research noted this week that the current round of load shedding is likely to have a similar impact on the nation's GDP in the third quarter.

"The intensity of the current power cuts threatens the GDP recovery from the 0.7% q- o-q contraction experienced in 2022 Q2. It also serves as another reminder of the urgency to fast-track increased private sector power generation, including securing funding for this," said the BER.

Alexforbes chief economist Isaah Mhlanga said Eskom's prolonged stage 6 load shedding has already caused significant damage to the country's economy, with over R4 billion wiped from the GDP for each day it continues.
If it were not for Eskom's failings, the country's economy could be between 8% and 10% larger, said Francis Stofberg, senior economist at the Efficient Group.

But aside from the damage done to the economy in general, specific sectors are now sounding alarms over the harm caused by Eskom's load shedding.

Required:

Read the remainder of this detailed article and, with the aid of a graph, explain the concepts of supply, demand, production, scarcity, choice and opportunity cost in the context of the article. Reflect on how inconsistent access to energy will affect the South African economy. In addition, briefly discuss an ethical approach to the prioritisation and allocation of resources to solve the energy crisis being experienced.

Compare and contrast the economic systems found in North Korea and Australia. How do these systems help or hinder the economic growth of each country?

QUESTION 2

Define and distinguish gross domestic product (GDP) and gross national product (GNP).

List and briefly describe the three ways in which a country's gross domestic product (GDP) can be calculated.

QUESTION 3

In February 2023, the South African Reserve Bank increased interest rates for the eighth consecutive time since November 2021. Over the period in question the prime interest rate has increased by 3.75% to 10.75%, its highest since 2009.

What this means, according to Stofberg (2023), is that every R1-million debt that a household has, will now be roughly R3,125 more expensive each month. Data shows that the middle class - roughly
million adults earning between R8,000 and R30,000 per month - are now spending almost two- thirds of their salary on servicing debt (Stofberg, 2023).

Based on your knowledge of economics, discuss why this has been done and consequences that South Africa could have faced if it allows inflation to rise.

QUESTION 4

Global economy shows resilience, pain 1 year since the start of Ukraine war

An Egyptian widow is struggling to afford meat and eggs for her five children. An exasperated German laundry owner watches as his energy bill jumps fivefold. Nigerian bakeries have shut their doors, unable to afford the exorbitant price of flour.

One year after Russia invaded Ukraine on Feb. 24, 2022, and caused widespread suffering, the global economy is still enduring the consequences - crunched supplies of grain, fertilizer and energy along with more inflation and economic uncertainty in a world that was already contending with too much of both.

As dismal as the war's impact has been, there's one consolation: It could have been worse. Companies and countries in the developed world have proved surprisingly resilient, so far avoiding the worst-case scenario of painful recession.

But in emerging economies, the pain has been more intense. The International Monetary Fund dropped growth expectations this year and in 2022 that equates to about $1 trillion in lost production. Europe's economy, for example, "is still experiencing significant headwinds" despite a drop in energy prices and is at risk of falling into recession, said Nathan Sheets, global chief economist at banking giant Citi.

The IMF says consumer prices jumped 7.3 percent in the wealthiest countries last year - above its January 2022 forecast of 3.9 percent - and 9.9 percent in poorer ones, up from 5.9 percent expected pre-invasion.

In the Indonesian capital, Jakarta, many street vendors know they can't pass along surging food prices to their already struggling customers. So some are skimping on portions instead, a practice known as "shrinkflation.''

"One kilogram of rice was for eight portions ... but now we made it 10 portions," said Mukroni, 52, who runs a food stall, and, like many Indonesians, goes by only one name. Customers, he said, "will not come to the shop" if prices are too high. "We hope for peace," he said, "because, after all, no one will win or lose, because everyone will be a victim.''

Required:

Critically evaluate the impact of the Russian invasion of Ukraine on 24 February 2022 on globalisation, and discuss how the implementation of protectionist policies applied by governments can mitigate the impact of such conflict on domestic economies.