1. Economics & Finance
28th July2017
Ayesha Sayed

2. WHAT IS ECONOMICS We have unlimited wants but limited resources.
Economics deals with deciding on the best possible options we have given the scarcity of what we want.
Think of resources such as land, water, agricultural commodities, financial provisions, technology, time, etc.
Ayesha Sayed

3. What is Finance? Finance is about: Identifying risk Measuring risk
Reducing risk
Risk = Uncertainty
Ayesha Sayed

4. GROSS DOMESTIC PRODUCT
GDP represents the wealth of a country
How does the meteorite impact affect the South African economy and our welfare?
Ayesha Sayed

5. GDP=C+I+G+NX CONSUMPTION (C) +
Final goods and services (output) used to consume.
Not for use to produce another output
An increase in C will increase GDP
How does the meteorite affect our consumption of maize and other commodities affected by the meteor impact.
Ayesha Sayed

6. GDP=C+I+G+NX INVESTMENT (I) +
This refers to new capital goods that are purchased
Higher investments leads to higher GDP
Foreign direct investment refers to investments made into SA by foreign individuals/countries/entities.
How does the meterorite impact affect investment especially in the manufacturing industry?
Ayesha Sayed

7. GDP=C+I+G+NX GOVERNMENT SPENDING (G)+
The government’s spending on the economy such as: infrastructure, education, housing, water and sanitation, etc.
Increasing government spending increases GDP
How does a government pay for these services?
How will the meteor impact affect government spending and
How will the government pay for it? Increase tax? Borrow more? Ignore the debt?!
Ayesha Sayed

8. GDP=C+I+G+NX NET EXPORTS (NX)=Exports-Imports (E>I +)
Exports are goods produced in South Africa and purchased by a foreign country, it increase GDP
SA is a net exporter of mostly primary goods from the agricultural, forestry and fishery sectors.
Imports are foreign goods being purchased by South African citizens, it decreases GDP.
So NX can be negative or positive.
The exchange rate affects trade: a weaker Rand stimulates exports but it also can cause higher inflation which increases the cost of living.
Ayesha Sayed

9. What is a derivative?
Any security whose value is determined by, or derived from, the value of another asset.
Ayesha Sayed

10. How does a futures contract work?
Ayesha Sayed

11. WHAT IS “INFORMATION ASSYMETRY”?
deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of power in transactions, which can sometimes cause the transactions to go awry, a kind of market failure in the worst case.
Information is POWER
Ayesha Sayed

12. Who are the different STAKEHOLDERS that will be impacted by the meteor strike?
Ayesha Sayed

13. Maize is undoubtedly South Africa’s most important field crop and the staple food of the population. About 61% of maize produced in South Africa is white which is primarily used for human consumption, while the remaining 39% is yellow and is predominantly used for animal feed production.
Ayesha Sayed

14. Ayesha Sayed

15. Ayesha Sayed

16. How will a meteor impact affect food security and how can you use derivatives to “reduce” the risks to food supply and food security?
Ayesha Sayed

17. Links
What are derivatives?
How Grain Futures Contracts Revolutionized Finance:
Understanding the Grain Delivery Process:
Infographic: The Facts Behind Food Prices:
Infographic: What is Hedging:
Annual Report Department of Agriculture, Forestry & Fisheries:
Ayesha Sayed