1. Copyright 2011 The McGraw-Hill Companies 14-1 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show 14 The S.A. Economy: Public and Private Sectors

2. Copyright 2011 The McGraw-Hill Companies 14-2 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show Chapter Objectives Land area an Population of S.A. Important Facts About S.A. Households and S.A. Businesses Principle - Agent Issues Economic Role of Government in the Economy Categories of Government Spending and the Sources of Government Revenues

3. Copyright 2011 The McGraw-Hill Companies 14-3 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show S.A. Land Area and Population (%) Eastern Cape Free State Gauteng Kwazulu Natal Limpopo Mpumalanga Northern Cape North West Western Cape South Africa 102030 40 Source: StatsSA (169 500) Land area per sq/km (129 480) (17 010) (92 100) (123 910) (79 490) (361 830) (116 320) (129 370) (1 219 090 sq km ) (49320 million) (6 648) Population ‘000 (2 902) (10 531) (10 449) (5 227) (3 606) (1 147) (3 450) ( 5 356)

4. Copyright 2011 The McGraw-Hill Companies 14-4 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show Households as Income Receivers Functional Distribution of Income-2005/6 Income from work Income From Capital Imputed Rent Social and Insurance Grants Other Income Income By Function Performed National Income Received (Percent) 0 10 20 30 40 50 60 70 74% 1% 6% 9% Source: StatsSA

5. Copyright 2011 The McGraw-Hill Companies 14-5 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show Distribution of Household Consumption expenditure Food and Bev Alcohol & Tobacco Clothing and Foot Fuels and water Furniture & H Equip Health Transport Communication Recreation & Cultu Education Restaurant & Hotels Miscellaneous Unclassified 5 10 15 20 25 (%) Source: StatsSA R8 105 R647 R2 781 R13 245 R3 868 R933 R11 180 R1 969 R2 582 R1 356 R1 232 R8 081 R172

6. Copyright 2011 The McGraw-Hill Companies 14-6 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show Distribution of Household Income per decile (Mean rand per annum ) (see also Chapter 11 p – Table 11.1) Food and Bev Alcohol & Tobacco Clothing and Foot Fuels and water Furniture & H Equip Health Transport Communication Recreation & Cultu Education Restaurant & Hotels Miscellaneous Unclassified 1 2 3 4 5 6 7 8 9 10 Source: StatsSA 5040302010

7. Copyright 2011 The McGraw-Hill Companies 14-7 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show Households as Spenders Composition of Consumption -2009 Durable Goods Semi Durable Goods Services 0 10 20 30 40 50 60 70 80 90 7% 9% 40% Source: Bureau of Economic Analysis Non- Durable Goods 44%

8. Copyright 2011 The McGraw-Hill Companies 14-8 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show The Business Population Sole Proprietors Partnerships Closed Corporations Companies –Private –Public

9. Copyright 2011 The McGraw-Hill Companies 14-9 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show Legal Forms of Business Corporate Securities –Stock –Bond Limited Liability Hiring of Specialists Unlimited Lifetime Principal-Agent Problem Advantages of Companies 14.1

10. Copyright 2011 The McGraw-Hill Companies 14-10 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show The Public Sector: Government’s Role Providing the Legal Structure Maintaining Competition –Monopoly –Regulation –Regulated Monopolies Competition Commission Competition Tribunal Competition appeal board

11. Copyright 2011 The McGraw-Hill Companies 14-11 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show The Public Sector: Government’s Role Redistributing Income –Transfer Payments –Market Intervention –Taxation Reallocating Resources –Market Failure Externalities or Spillovers Negative or Positive 14.2

12. Copyright 2011 The McGraw-Hill Companies 14-12 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show The Public Sector: Government’s Role Correcting for Negative Externalities –Legislation –Specific Taxes Correcting for Positive Externalities –Subsidize Consumers –Subsidize Suppliers –Provide Goods Via Government

13. Copyright 2011 The McGraw-Hill Companies 14-13 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show The Public Sector: Government’s Role Public Goods and Services Private Goods –Rivalry –Excludability Public Goods –Nonrivalry –Nonexcludability –Free-Rider Problem Quasi-Public Goods The Reallocation Process

14. Copyright 2011 The McGraw-Hill Companies 14-14 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show The Public Sector: Government’s Role Promoting Stability –Unemployment –Inflation Government’s Role: A Qualification –Political Context –Overregulation –Underregulation –Benefits and Costs –Not Perfectly Carried Out

15. Copyright 2011 The McGraw-Hill Companies 14-15 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show R93.2 R85.6 R135.4 R33.8 Government Finance Expenditures-2010/11 04080120160200 Education Economic Affairs Other Source: www.treasury.gov.za R165.1 R154.8 R130.9 R102.1 Eigth Areas of Spending (R billions) Health Social Protection Housing & Com Order & Safety Defence

16. Copyright 2011 The McGraw-Hill Companies 14-16 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show R22 Government Finance Government Tax Revenues-2010/11 050100150250300 Personal Tax VAT Company Tax Fuel Levy Source: www.treasury.gov..za R230.1 R164 R151.1 R31 Customs Duties Basic Revenue Sources (billions) R20.5 R29.2 Excise Taxes Other

17. Copyright 2011 The McGraw-Hill Companies 14-17 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show Ke Nako Last Word “I think as South Africans, we need to remember that we are a teenager in the world of nations and for us this has been a proud moment since 1994 and from the economic point of view all the investment was money well spent,” Gordhan said at a FIFA press conference. He is adamant that for South Africa, the tournament’s benefits will not only be seen in terms of economic legacy but could help the country increase its delivery capacity while demonstrating to the world its ability to host major events. The national government spent more than R33 billion over a period of four years on infrastructure and preparation for the World Cup. Close to R12 billion was spent on stadia infrastructure with another R11 billion spent on transport and R1.5 billion spent on event broadcast and telecommunications. Source: http://www.sa2010.gov.za/node/3330

18. Copyright 2011 The McGraw-Hill Companies 14-18 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show Key Terms Page Land area and populationLand area and population Household Income Household spending durable goods nondurable goods Services Legal Forms of BusinessLegal Forms of Business limited liability principal-agent problem externality negative externalities positive externalities public goods quasi-public goods government purchasesgovernment purchases transfer payments personal income tax corporate income tax sales and excise taxes property taxes Government ExpenditureGovernment Expenditure

19. Copyright 2011 The McGraw-Hill Companies 14-19 Land Area and Population Households as Income Receivers Households as Spenders Legal Forms of Business The Public Sector: Government’s Role Government Expenditure Government Revenue Last Word Key Terms End Show Next Chapter Preview… Measuring Domestic Output and National Income