Business Studies 133 Pace Updated Pics

SA BUSINESS STUDIES Name Date Test Issued ScoreSA 1133 _____________

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SA BUSINESS STUDIES 1133 – BUSINESS ENVIRONMENTS TABLE OF CONTENTSI. Macro-Economic ChallengesII. Different EnvironmentsIII. Macro-Environment Business StrategiesIV. Business SectorsV. Labor LegislationVI. Social Responsibility OBJECTIVESWhen you have completed this PACE, you should understand:1. The impact of changing and challenging environments on business practice.2. Devising and evaluating strategies in response to macro-environmental challenges.3. The different business sectors in relation to different environments.4. The effects of labor legislation on business management.5. The concept of social responsibility and its implications for business. Learn this Scripture Verse© 2010 ACE School of Tomorrow Supervisor initial: __________All rights reserved. Printed in South Africa. This PACEmay not be reproduced in whole or part in any formor by any means without permission from ACE Schoolof Tomorrow. 1

VOCABULARYmicro-economic environment: the internal environment of a business, including factors thatcan be controlled by the business management, such as administration, production andfinancesmacro-economic environment: the external environment of a business, including factors thatthe business management cannot control, such as the exchange rate, inflation and interestratesmarket environment: refers to where the goods produced by the business get sold, andincludes the consumers of the product as well as competition in the marketproductivity: how quickly and efficiently a business can turn inputs into outputsglobalization: the process enabling financial and investment markets to operateinternationally, largely as a result of deregulation and improved communicationsSWOT: an acronym that stands for strengths, weaknesses, opportunities and threatsstrategy: a particular plan or policy devised by a business in order to obtain greater successsocial responsibility: the involvement of a business in the welfare of the general communityincluding moral and ethical obligations, financial obligations and labor obligationsBlack Economic Empowerment (BEE): a strategy implemented by the government to assistblack people in becoming involved in all areas of economic activity 2

Globalization is caused by I. Macro-Economic Challenges advances in Macro-economic challenges refer to the external communication. challenges that a business must face, and includes factors that are uncontrollable. Some of these factors may include Macro-environment interest rates, exchange rates, inflation, changes inMacro-environment refers to technology, political affairs and government policies.the external environment of Conditions in the world, both national and international,a business, including factors affect business in South Africa. Not only economic events but external events, such as environmental affairs, may that the business influence business. There are even socio-economic issues management cannot such as poverty, crime and disease that affect business control, such as the operations. Businesses also need to be aware of the effectsexchange rate, inflation and of globalization. This process enables financial and investment markets to operate internationally, largely as a interest rates. result of deregulation and improved communications. Advances in communication imply that information can The Global Village reach further than ever before, at increasingly higher rates. Due to technological World trade has increased significantly as a result of advances, especially in improvements in communication and transport. When communications, it is no businesses want to trade goods and services, they don’t longer possible for any just consider what is available in their own country, but alsocountry of the world to live what is available worldwide. in isolation. If inflation South Africa depends heavily on the proceeds of exports increases in the USA, the such as minerals and agricultural products. Having no oil ofinflation rate in South Africa its own, South Africa has to import it, making the countrywill be influenced. If interest extremely vulnerable for changes in the global market. rates rise in Europe, South Not only large businesses are affected by macro-economicAfrican businesses will have challenges. Both small and medium businesses are to plan accordingly. influenced by external changes. All businesses need to be prepared for these changes by planning and implementing Important Words different strategies. A business must be aware of its inherentglobalization: the process weaknesses and possible threats from external sources inby which companies expand order to succeed in a global environment.to operate internationally The process of strategic planning is important in managingstrategy: a particular long- change. Some elements of strategic planning are:term plan for success • Determine mission and goals.vulnerable: capable of • Gather information by completing a SWOT analysisbeing wounded or hurtmission: aims and (strengths, weaknesses, opportunities and threats).objectives of a business • Review goals. • Develop plan of action in order to achieve goals. • Implement plan of action. • Evaluate performance. • Take corrective action where necessary. • Review the original mission and goals of the business. 3

II. Different Environments Control Over Environments Business management can A. Main EnvironmentsThe business environment can be divided into three control its micro-environment todifferent main environments: a large extent because it • The micro-environment consists of the internal involves aspects such as the environment of the business, and may include issues administration and production of such as administration, production, finances and management. the business. There is less control over the • The market environment is where the goods produced by the business get sold and includes the market environment, but consumers of the product as well as competition in management can at least the market. influence the different role • The macro-environment refers to the external players. environment of the business, including factors that The macro-environment consists the business management cannot control, such as the exchange rate, inflation and interest rates. It of variables that business may also include political and social factors. management has no control B. Macro-Economic Environments over whatsoever such asWe will now discuss a number of external variables that interest rates.form part of the macro-economic environment, as well asstrategies that businesses may adopt to deal with such Productivitychallenges. Productivity is about how quickly and efficiently a1. The Economic Environment includes aspects such as business can turn inputs into interest rates, inflation and legislation. In fact, any factor outputs. Increased productivity that influences the profitability of a business forms part should be a primary goal of any of the economic environment. business; without a satisfactory The main purpose of any business is to make profit. The level of productivity, no best way to increase the profitability of any business is business will be able to survive to increase the productivity of the business. Productivity in the long term. A country’s refers to the efficiency of the production process. This rate of productivity is a very can be increased by reducing the inputs of the business good indicator of the economic such as raw materials and labor, or by increasing the condition of that country. High output of the business. productivity implies success in Taxation is an important challenge for any business as a fighting inflation and ability to high tax rate will have a negative effect on profits after compete in the international taxation. A business may rather use surplus funds to market. South Africa’s general expand the business, instead of paying out in dividends productivity is unfortunately that will just increase tax payable. If a country experiences low economic growth rates all very low. businesses will eventually be affected. Businesses may investigate new export markets when local demand becomes insufficient.4

High interest rates affect Increases in general interest rates may seriously the profitability of all influence the profitability of a business as it becomes businesses. more difficult to repay existing loans and to raise more funds for expanding the business. COSATU There are specific strategies that a business should try to The Congress of South adhere to in times of high interest rates. A business African Trade Unions is the should refrain from borrowing capital as far as possiblelargest trade union in South and try to pay off existing loans as soon as possible. Africa, and is an important When interest rates are low, businesses shouldalliance partner with the ANC investigate opportunities to expand.government. It was launched The exchange rate is a macro-economic variable that in 1985 and currently has can affect a business significantly. When the rand increases in value relatively to currencies such as the more than 2 million dollar and the euro, exporting companies will be members. Its slogan “an affected negatively. When the rand decreases in value injury to one is an injury to it will become more expensive to import goods such as raw materials and equipment, once again negatively all” has become quite influencing certain types of businesses. Government famous. COSATU is a can protect local businesses against fluctuations in the significant role player in the exchange rate by restricting cheap imported goods.political environment and will Businesses should try to increase productivity, and localcontinue to influence policies suppliers should be supported when imported materials become too expensive. in the near future. 2. The Political Environment can seriously impact the Important Words profitability of a business. If a government shows signs of refrain: stop yourself from instability, it will be difficult to attract investment and doing something foreign trade to that country. fluctuation: changing The government of South Africa has often made it clear position constantly that it favors economic growth as the way to create alliance: an association jobs and prosperity for the people of the country. The formed by groups who provision of infrastructure such as water, electricity and wish to support each other roads benefits the establishment of small businesses. forum: a meeting where a Fewer regulations, tax cuts and further education public discussion is held create an environment in which businesses can succeed. Some of the biggest trade unions in South Africa are alliance partners with the government and therefore form an important part of the political environment. Businesses should try to cooperate with unions as far as possible, and should participate in labor-related forums. Trade agreements often exist between countries and these can be used by businesses to export to relevant countries. This will lead to lower input costs and higher profits because of fewer restrictions and less taxes. 5

3. The Social Environment entails issues such as crime, HIV/AIDS poverty and unemployment. A business situated in an This is most probably the area where there are high levels of crime and poverty worst pandemic ever to hit will battle to succeed. Customers and staff members the human race. All the may feel unsafe, and theft will cause profitability to people of South Africa are decrease. affected by the disease, so Businesses must carefully consider the location of their premises, and if situated in high risk areas, security will it can no longer be the have to be improved. These may include security responsibility of individuals, guards, cameras and special fencing. Businesses may or the government alone to even become involved in social upliftment programs for poor communities. do something. It has HIV/AIDS has become a serious threat for many South become the responsibility of African businesses as staff members get sick and are absent from work for long periods of time. Businesses everybody, including the may invest large sums of money in the training of staff business sector. and then lose them as a result of death. Businesses need to educate workers on the dangers of HIV/AIDS, Important Words and assist workers infected with these diseases as far as possible. premises: a building and its Large percentages of workers in South Africa have very grounds little formal education and training. Businesses should promote continuous training in order to improve their bursary: a scholarship or staff members’ skills levels. Bursaries for young workers grant awarded to a student will encourage them to work hard and excel. pandemic: a disease affecting people over a wide geographical area6

Global Warming 4. The Physical Environment of a business can contribute When poisonous gases are to the success or failure of the business. South Africa has lots of natural resources such as minerals and fertile soil. released into the Valuable minerals such as gold, platinum and atmosphere it causes diamonds create an excellent environment fortemperatures to rise all over profitable mining activities. The level of pollution in an area can eventually the world. The threaten a business as staff members may develop consequences of global chronic diseases, such as asthma and other lung warming may include diseases. Customers may even move away from the increases in the occurrence area causing demand to drop. Businesses should notof hurricanes and typhoons, contribute to the pollution of an area, must comply withflooding, extensive droughts environmental legislation, and use recycled materials and severe temperature as far as possible. variations. Any of these South Africa has an excellent climate for most business conditions make it very ventures as it seldom gets too cold or too hot. The difficult for businesses to agricultural sector can stay profitable by adapting to continue with normal different circumstances such as droughts and floods. operations. For this reason Conservation areas should be respected and valued businesses should have and all businesses should be aware of their responsibility towards the environment. strategies in place to provide for the effects of 5. The Technological Environment of a business global warming. Businesses determines the success of many businesses today. should also have policy in Technological advances may influence areas such asplace to ensure that they do communications, production and marketing. Job not contribute to pollution security is often threatened by technological advances. The purpose of new technology should be and specifically global to produce better products using less input resources, warming. and not to reduce the number of staff members. Workers can be retrained to fill other positions in the Important Words organization. They should also be taught how to properly use and maintain new technology so that theglobal: of the whole world business can get maximum benefit from it. A major problem with the introduction of advancedrecycle: convert waste technology is that people with high levels of computermaterial into a form in and technical skills are needed to utilize it. Unskilledwhich it can be reused laborers may lose their jobs, and people with the correct qualifications and skills will have to beventure: an undertaking appointed causing a lack of continuity in the business.that is risky or of uncertain Staff members need to be flexible to adapt to changesoutcome at work due to technological advances. This may cause workers to become stressed and anxious. Itadvanced: being ahead in sometimes happens that traditional craft skills aredevelopment, knowledge or completely lost to the community by technology.progresscontinuity: to carry onuninterruptedlychronic: of long duration 7

Trade unions need to be informed of any new Legislation on Business technology and the ways it will affect the labor force of Operations a business. If it really becomes necessary to retrench workers, skills programs may be offered to assist them to There are many different find another job or even start their own business. laws that a business has to The aim of new technology should always be to increase the productivity of a business. If the cost of consider such as: implementing the new technology exceeds the • Skills Development Act amount of extra productivity gained, there will be a negative effect on profitability. Competitors need to be • Labor Relations Act carefully monitored in order to determine the amount • Employment Equity Act of new technology they implement, and the effect that it has on the market price of the product. • Basic Conditions of Employment Act6. The International Environment implies that businesses today operate on a worldwide scale through • Compensation for advanced technology. A business needs to consider Occupational Injuries not only his local competitors, but also similar imported and Diseases Act products. If a local business wants to export goods overseas he will have to study consumer behavior in • Black Economic that country carefully. In order to be successful a Empowerment business must try to produce a better product than his international competitors at a lower price. • National Credit Act • Consumer Protection7. The Legal Environment: There exist laws and regulations in South Africa that all businesses must adhere to. Act Businesses should operate within the laws of both its own country as well as the countries it trades with. Important Words Legislation includes taxation, finances, ethics, treating employees fairly, and taking care of the environment. retrench: reduce the number of people working for a business behavior: to act or function in a particular way equity: fairness, justice compensation: giving a person money to make up for a loss or injury8

Important Words III. Macro-Environment Business Strategiesacronym: a word or name A. Formulation of Strategiesformed from the initial Any successful business must constantly devise andletters of other words formulate strategies in response to the challenges of the macro business environment. Such strategies need to beimplementation: putting a critically evaluated by the management of the business,plan into action and recommendations should be made as required. Advanced problem-solving skills as well as creative thinkinginternal: coming or acting techniques can be used to devise business strategies,from within generate business ideas, resolve conflict and solve any business-related problems.external: coming or acting There are a number of basic steps involved in problemfrom the outside solving: SWOT Analysis • Identify the problem. The strengths and • Get as much information about the problem asweaknesses of a business arenormally concerned with the possible, as well as different viewpoints frominternal environment of the different people. business, such as the skills • List all possible ideas to solve the problem. of the staff or lack of • Select the best solution. • Implement and check on the results. finances. Opportunities and threats B. Implementation of Strategiesare normally concerned with The formulation and implementation of business strategy isthe external environment of an ongoing process. Part of this process is completing a SWOT analysis on a regular basis. As you have already the business such as learned, SWOT is an acronym that stands for strengths, emerging markets, new weaknesses, opportunities and threats. competitors and interest Strengths are all the advantages and skills that the business has. It may also include the assets of the business. rates. Weaknesses are all the things that the business cannot do. Examples of these can be facilities or machinery that theThe Use of Questions in business does not have yet. It may also include lack of Determining Strategy finances. Opportunities are the chances that exist in the available The management of a market for the business to sell its products or services. business could use Threats are the things that may cause the business to fail. Examples of these may include existing or new competitors,questions to help them with as well as the behavior of consumers, and external factors strategic planning. These such as interest rates and exchange rates. may include: Due to the global nature of business activities in recent years, the SWOT analysis needs to include all possible• What do our customers business environments. want? After implementation, the results of new strategies must continuously be monitored and evaluated. • What are our success factors? • Who are our competitors? • What is different between us and the competition? • How can we improve our product? 9

C. Types of Business Strategies Expansion of products is aThere are many different types of business strategies that diversification strategy.can be employed by a business to improve its situation inthe macro-environment. Strategic Planning• Integration strategies involve the process of making the Strategic planning consists business and its products part of the industry on a of a number of steps: global scale. • Determine mission and• Intensive strategies include market penetration (when a new market is entered) and market development goals (when existing markets are developed and expanded). • Gather information Product development, such as improvement of the product, is also a type of intensive strategy. (SWOT)• Diversification strategies involve the development or • Review goals expansion of products and operations by a business in • Develop plan of action order to spread risk. A business that normally produces in order to achieve goals bread may diversify by including cakes and • Implement plan of confectionery in its product range.• Defensive strategies include drastic tactics such as the action retrenchment of employees, divestiture (to scale down • Evaluate performance the activities of the business), or even the liquidation of • Take corrective action the business.• Other strategies: The business can reposition itself by where necessary replacing one or more key individuals. Sometimes it • Review the original becomes necessary to revise the mission and objectives of the business completely. New policies may be mission and goals of the introduced and new performance incentives for staff business members can be developed. Companies may issue extra shares in order to raise capital, or even decrease Important Words the annual dividend. The allocation of resources can integration: making parts also be done differently in order to improve the into a whole productivity of the business. diversify: to vary products and operations in order to D. Strategic Evaluation spread riskWhatever the strategy that the management of a business liquidate: to terminate thedecides to employ, it must constantly be evaluated and operations of a businessimproved. Recommendations for strategy improvement incentive: an additionalshould be submitted by the managers of the different payment made to workers todepartments of the company. increase productionStrategic evaluation normally consists of three basicactivities;• Examination of the underlying bases of the strategy.• Comparison of expected performance with previous performance.• Taking corrective action where necessary.10

Important Words IV. Business Sectorstextile: of or relating to Business and industrial activities in a country are normallyfabrics or cloth divided into three different sectors: the primary sector, the secondary sector and the tertiary sector.processing: a series of The primary sector provides raw materials from nature in aactions which produce a way that they are useful and valuable. These products arechange or development then used or processed by other businesses in the secondary and tertiary sectors. Examples of primaryretailing: selling goods in activities are mining, agriculture, fishing and forestry.small quantities to The secondary sector uses the output from primaryconsumers industries to manufacture and process products. Value is added to the products because more money can be Gold Mining in SA earned from the secondary product than from the primaryGold was first discovered on product. Examples of the secondary sector include textiles, construction, processing of food and the manufacturing of the Witwatersrand in the furniture.1870s. It soon became clear The tertiary sector is also called the service sector of the that the gold deposits were economy. Examples of such services are banks, insurance companies, transportation, tourism, retailing and too deep to make it professional services.profitable for individuals to There exists a complex relationship between the three business sectors of the economy. They all need to work mine and large mining together in order to supply goods and services to the companies came into consumer. Look at the picture below: Oranges are existence. The mines also produced on a citrus farm (primary sector), they are taken needed plenty of cheap to a factory where the juice is extracted (secondary labor to make them sector), and then sold to the public in a grocery store profitable. Today gold (tertiary sector). mining is still one of the most important primary industries in South Africa. The mining houses influence society and the economy because they are such huge employers. 11

Earlier in this PACE we said that a business is influenced by The Textile Industrythree main environments: the micro-environment, the The textile industry is anmarket environment and the macro-environment. Any example of a secondaryindustry needs to manage these three environments to the sector industry in Southbest of his ability. Africa. It uses the outputLet’s study the example of oranges again. The micro- from primary industries toenvironment of this industry includes natural resources such manufacture products thatas water, soil and the orange trees. These resources should can be sold to the public. Inbe used in a sustainable way. There is also much labor the past the textile industryinvolved in the fresh produce industry and employers need was a large contributor toto be aware of applicable legislation. the economy, but in recentThe market environment of the citrus industry is very years there have been manycompetitive. Many South African farmers market their changes. Thousands of jobsoranges (as well as the secondary products such as orange were lost largely as a resultjuice) overseas because profitability is increased in this way. of imports from China.Marketing overseas, however, involves a lot of rules and These imports had a severeregulations. Intermediary businesses often operate in themarket environment by buying the product from the impact on the textileprimary producer and selling it to the final consumer. The industry of South Africabiggest advantage of an intermediary business is that the causing many clothingfarmer can focus on the production of the goods, and factories to close down.leave the marketing to somebody else. The disadvantage Many other countries in theis that much of the profit goes to the intermediary business. world such as the UnitedAnother important intermediary in most industries is States and the Europeantransport. Fresh produce needs to be taken to consumers Union had either bannedas quickly and efficiently as possible. imports from China orThe macro-environment may include the economic, imposed quotas on Chinesepolitical, social, physical, technological and international imports in order to protectenvironments. If the product is marketed overseas local textile industries.economic and international factors such as the exchangerate and trade agreements may influence the local South Africanbusiness dramatically. Because the industry is labor manufacturers can onlyintensive, any social issues such as HIV/AIDS and labor compete with China bylegislation will affect productivity. improving productivity andIt is clear that any business constantly needs to be aware ofthe different environments influencing its profitability. They efficiency.must realize that no business exists in isolation, and in orderto be successful it must continually adapt. Relevant Important Wordsstrategies should be devised to prevent challengesbecoming serious threats. Many of these challenges are sustainable: capable ofactually interrelated such as poverty and disease, and being maintained at a steadyshould be addressed accordingly. Changes in especially level without exhaustingthe macro-economic environment could often be natural resourcesexperienced as positive trends if handled correctly. intermediary: situated or coming between isolation: placing a person or thing apart or alone quota: a prescribed number or quantity12

According to the V. Labor Legislation Employment Equity Act people with disabilities On April 27, 1994, the first democratic election was held in South Africa. The African National Congress (ANC) became must form part of the the ruling party, and since then many changes have been workforce of a business. made in labor legislation. Some of the first legislative changes made were the introduction of minimum wages Employment Equity Act and the removal of trade barriers such as import duties. This Act applies to all After the 1994 election, a new Constitution was created for South Africa, as well as a number of new laws reflecting the businesses with more than country’s new democratic order. The current labor 50 employees. The purpose legislation includes the following:of this Act is to achieve a fair 1. Basic Conditions of Employment Act 75 of 1997. This act representation of people legalizes the number of hours that an employee may from designated groups in work per week, as well as issues such as leave, payment all occupational categories of salaries, deductions and termination of employment. and levels in the workforce. 2. Labor Relations Act 66 of 1995. The purpose of this Act is The designated groups are: to advance economic development, social justice, labor peace and the democratization of the • black people workplace. The law legalizes trade unions and the right • women of workers to join a trade union, as well as the bargaining and negotiating powers of trade unions. • people with disabilities Strikes and unfair dismissals also form part of this Act. If a business has more than 3. Employment Equity Act 55 of 1998. South Africa has a150 workers an employment history of discrimination against people of specific race or gender, and this Act was passed to address these equity plan must be issues. The Act is applicable to all businesses with asubmitted. Such a plan must workforce of more than 50 people, or whose turnover contain special affirmative exceeds the limit for Small, Medium, and Micro enterprises (SMMEs). According to this Act a business action measures. must achieve a fair representation of people from all designated groups. These groups include black people, Important Words women and people with disabilities.democratic: representing 4. There are three Acts that aim to address the skills ofall the people of a country South African workers. The purpose of these Acts is todeduction: something that develop the skills of workers, and to enable employersis subtracted or taken away and workers to become more productive andpreferential: to like better competitive. They are:or value more highlyprocurement: to obtain or • Qualifications Authority Act 58 of 1995acquire • Skills Development Act 97 of 1998 • Skills Development Levies Act 9 of 1999 Black Economic Empowerment (BEE) is a government strategy that aims to address human resource development, employment equity, ownership and control of enterprises, and preferential procurement. 13

VI. Social Responsibility Important Words A. General Responsibilities remuneration: reward or payAll businesses have a responsibility towards society. Social for workresponsibility can be seen as the involvement of a businessin the welfare of the general community. In order to see elimination: removing orthe nature of social responsibility more clearly, we must look taking outat the general responsibilities of management.1. Primary responsibilities: These include the production of society: people living together in a community high quality goods and services at competitive prices, the rendering of a satisfactory return on investments, utilization: making practical satisfactory growth of the organization, and the or worthwhile use of provision of work at a reasonable remuneration.2. Secondary responsibilities: These include the effective moral: what is right and utilization of resources, the provision of a safe working wrong in behavior environment, the maintenance of good labor relations, work benefits and job satisfaction, as well as providing Social Investment continuous training to workers. Projects3. Tertiary responsibilities: These consist of the elimination of poverty, the provision of health and welfare services, There are many different the provision of educational opportunities, adequate ways in which businesses housing and transport services, and the improvement of quality of life for the community. can take part in socialDifferent companies have different views on social investment in a localresponsibility. Some companies interpret social responsibilityas the donation of money to events and activities that act community:as advertisements for the company. Examples of these are • Sponsoring localthe sponsorship of sport teams such as rugby or soccerteams. Music events or art festivals are often sponsored by sporting eventscompanies such as banks and cellular phone companies. • Sponsoring educationSponsorships should not be the only way in whichcompanies show their social responsibility towards society. and training projects inSustainable development should rather be the aim of such the communitycompanies. Sustainable development involves theutilization of resources for the benefit of all people, but • Sponsoring communitywithout depleting them. Businesses must address the upliftment projects,development of unequal societies, and aim to createbetter living conditions for all the people of South Africa. such as the provision ofSocial responsibility generally includes: water or building a• The moral and ethical obligations that an organization community center has to the community.• The financial obligations to the state (e.g. paying • Sponsoring nature taxes). conservation projects or• The labor obligations to organized labor (e.g. the the cleaning up of various laws that have to be obeyed). polluted areas Statistics in Social Responsibility In America and some European countries about 10% of all investments can be considered socially responsible investment. In South Africa only about 1% of investments goes towards socially responsible investments.14

Corporate Social B. Practical Aspects of Social Responsibility Responsibility (CSR) • Human Rights Issues: The Bill of Rights in the South Businesses are responsibleto society in many different African Constitution ensures that all people in Southways. All businesses should Africa are treated with equal respect. No discriminationrealize that their investment should exist in the work place. Human rights must be into the development of considered in all business operations. Some of these human rights are: unequal societies willeventually benefit the whole o People have the right to freedom of speech o People have the right to education and training of South Africa. Social o People have the right to free association investment is not only the o People have the right to legal representation o People have the right to work where they prefer responsibility of large o People have the right to use their own language companies, but also that of • Diseases such as HIV/AIDS: Because of the constant increase in the number of people infected by diseases every small business. such as HIV/AIDS and tuberculosis in South Africa, the Business and government labor force of the country is seriously affected. Skilled workers are absent for long periods of time, and many can in many cases form of them die causing a reduction in the skilled laborpartnerships to create better force. Businesses should be aware of this all the time living conditions for all the and try to educate their workers about the dangers of being infected with these diseases. Employees who are people of the country. already sick must receive appropriate treatment. • Social Investment Projects: Businesses should try to play Important Words an uplifting role in local communities. Apart from the fact that it forms part of social responsibility, it has theassociation: joining others advantage that these people could then afford to buyin friendship or business the goods that the business is manufacturing. Examples of such projects are clinics, sports facilities, and evenrepresentation: helping the provision of basic services such as clean water andsomeone by acting on his electricity.behalfconstitution: thefundamental principles onwhich a country is governedtuberculosis: a diseaseaffecting the lungs 15

• Unemployment: Unemployment happens when people Important Words are willing and able to work, but are unable to find a job. Unemployment has a long history in South Africa. initiative: the power to start For many years there have been more people than a new process suitable jobs. Many different initiatives have been implemented over affirmative action: the years to address the problem, but few of them something that is done to have really been successful. Both the Reconstruction favor people who have been and Development Program (RDP) and affirmative treated unfairly action failed to solve the problem of unemployment. It is generally agreed all over the world that the best entrepreneur: a person who way to combat unemployment is to stimulate takes the risk to set up a new economic growth. In this way new businesses will be business created together with new employment opportunities. The people of the country should be trained and recession: a reduction in educated in order to develop their entrepreneurial skills, trade or prosperity hence unemployment is addressed by the people themselves. governance: the action or Unemployment in South Africa has many different roots. system of governing The previous policy of apartheid implied that people from some populations groups were not properly Socially Responsible educated, and could therefore never find proper Investment Index employment. Technological advances also often (SRI Index) implied that workers were replaced by new In 2005 this index was technology, especially in the industrial sector. launched on the There exist mainly two types of unemployment in South Africa: Johannesburg Securities 1. Structural unemployment occurs when structures in Exchange (JSE). The the economy of a country change and cause workers to be employed or laid off. Exchange rates, purpose of this was to put interest rates or general demand may influence South Africa in line with certain sectors such as mining or agriculture to global trends in corporate transform completely over time, causing large governance. Companies changes in employment patterns. must apply to be listed on 2. Cyclical unemployment happens as an economy the index and have to meet moves through the cycle of growth and recession. 94 criteria. Some of these This cycle will cause demand for products to rise and fall and unemployment will consequently be criteria involve the influenced. company’s commitment to Many countries all over the world struggle with the problem of unemployment, and no easy solutions have black economic been found anywhere. Education and development of empowerment, labor entrepreneurial skills generally seem to produce the best results. People must be taught how to create jobs policies, themselves and not to rely on the government. environmental/pollution control and the management of HIV/AIDS and other diseases in the workplace. The bottom line for sustainable business practice in South Africa has now become the principles of social, financial and environmental sustainability.16

BEE Criteria Black Economic Empowerment (BEE): This strategy was The government uses many implemented by the government in 2003 to assist black people in becoming involved in all areas of economic different criteria to score activity. Inclusivity (diversity such as race, gender, businesses for employment language, age and disability) forms part of BEE. The government introduced many different regulations equity (according to the in order to achieve the objectives of the BEE program. Broad-based Black Processes such as the granting of licenses, concessions and the issuing of tenders are influenced by adherence Empowerment Act 53 of to these regulations. Though BEE is a good initiative with 2003). worthy objectives, it has meant that many businesses had to retrench well qualified white workers with much This score is applied when experience in order to be able to employ the requiredgovernment grants licenses, number of black workers. In many cases productivity and profitability had to be compromised. concessions and issues • Criminal Activities: Crime has become a huge problem tenders. Some of the in South Africa and often has its roots in unemployment and poverty. Criminal activity within the businessemployment criteria used by environment should not be tolerated at any time.government are whether the A very important business crime in South Africa involves following people form part the loss of stock and raw materials. It is necessary for of a company’s workforce: businesses to employ a stock manager to monitor both stock and resources carefully. Any cases of theft should • Black people with immediately be investigated. The production process disabilities also needs to be properly managed in order to minimize wastage. Modern technology may be • Black people employed introduced to help decrease waste and to increase at senior management efficiency. level Every type of business faces its own problems with regards to criminal activities. Piracy has become a• Black women employed worldwide problem in recent years and includes the at senior management making of illegal copies of CDs and DVDs. People who level buy these illegal copies often do not realize that they deprive musicians, actors and producers, as well as • Black people that are businesses who legally sell these products from an professionally qualified, income. The use of illegal trademarks which look similar experienced specialists to the original ones is another type of piracy. There are a number of general guidelines that can be • Black women that are followed by businesses to protect themselves against professionally qualified, criminal activity: experienced specialists 1. The use of surveillance cameras. 2. The employment of security guards. • Black people employed 3. Large amounts of cash should not be kept on the as skilled technical and academically qualified premises. workers, supervisors 4. Expensive products should be locked up. and foremen• Important Wordsinclusivity: wheneverybody is includedconcession: a grant ofrights, land or property by agovernmenttender: a formal offer tocarry out worksurveillance: a close watchkept on a person or thing 17

C. Business Obligations Important WordsWe can generally say that social responsibility exceeds theboundaries of both primary and secondary responsibilities conservation: protectionof management. This represents what is known as the and management of natural“social contract” that the organization has with the resourcescommunity at large, and consists of an unwritten set of rulesand assumptions regarding the organization’s conduct. obligation: a moral or legalMany of the terms of this contract are found in the requirementpractices and values prevailing in a particular community.Any business has obligations to different parties such as purification: cleansingindividuals, the government, other organizations and thegeneral public. Environmental• Individuals: An employee, for example, expects fair Conservation South Africa has made great remuneration for services rendered as well as other strides in environmental appropriate fringe benefits, such as leave and medical conservation by generating aid. Each individual client of the business expects a new measures for the high quality product or service at a reasonable price. preservation of the• Government: A business acquires the right to trade from environment. There are the authorities, and therefore should comply with the several laws designed to laws of the central government, as well as those laid conserve the use of South down by provincial and local authorities. Africa’s natural resources• Other Organizations: Managers should respect and to ensure that certain competitors and other organizations by maintaining minimum standards are friendly and honest relations. Training institutions observed in industry to depend largely on the support of the local business avoid unnecessary pollution. community. Water has claimed much of• General Public: All businesses should be involved in the government’s attention improvement of the local community’s standard of because without water both living. This could be done be way of special projects people and industries would such as the building of sports facilities or community not survive. Recycling and centers. purification plants have become an integral part of the South African scene.18

Workers are entitled to D. The Quality of Work Life safe and healthy working There are a number of factors that will determine the quality of an employee’s work life: conditions. • Sufficient and fair compensation, including fringe Inflation benefits and other forms of remuneration to enable theInflation is a general rise in employee to maintain an acceptable standard ofprices accompanied by a fall living.in the purchasing power of • Safe and healthy working conditions, including the money. When the price of physical and mental environments that the employee is exposed to. one item rises because of • Development of human resources, including the high demand, it is not an opportunity to acquire new skills through continuous education and training. example of inflation. • Social interaction with other employees of the firm. Inflation only occurs when • Equal opportunities for all, disallowing discrimination of any form. prices across the entire • The protection of the South African Constitution and the economy of a country Bill of Rights, as well as the protection of all rights in continue to rise. The terms of the Labor Relations Act.opposite process of inflation • A balanced relation between an employee’s working is also possible. When the time and his family life, that is, whether he has enough general level of prices falls leisure time outside the work situation to spend with his we say that deflation is family. occurring. E. Other Concerns in Social Responsibility Inflation implies a general upward trend in prices. It is often Important Words argued that the management of businesses is sociallysufficient: enough responsible for price increases especially during times offringe benefit: additional inflation. It often happens that producers decide to raiseadvantage provided by an their prices in anticipation of more expensive resources,employer while consumers must adjust to higher prices long beforemental: of or in the mind they experience increases in salaries.interaction: having an It would seem, therefore, that management has a socialeffect upon one another responsibility towards consumers to increase prices onlyleisure: time that is free where it is absolutely necessary and then only by thefrom work amount necessary to maintain profit margins (especiallyanticipation: foresight or where the firm has not suffered any increased costs).expectation Care of the Environment: Mankind is destroying and damaging the environment at an alarming rate. South Africa has made great strides in environmental conservation by generating new measures for the preservation of the environment. The management of all businesses needs to accept its social responsibility in the fights against pollution and damage to the environment. 19

Devotional Watch Out For Those Donuts!There was a little donut shop with a sign up on the wall that read: “As you travelthrough life, whatever is your goal, keep your eyes on the donut and not on thehole.”Are you a Christian who keeps your eyes on the donut, or do you tend to lookonly at the hole? Hopefully, you spend most of your waking hours looking atdonuts!!The world can be a pretty scary place! When we hear about disasters in the world, calamities, stockmarket crashes and recessions, it’s easy to lose heart and become fearful. But Christianity and pessimismdo not mix. So do yourself a favour; choose to be a hope-filled Christian. Think optimistically about yourlife and your future. Trust your hopes, not your fears, and take the time to celebrate God’s gloriouscreation. Then, when you’ve filled your heart with hope and gladness, share your optimism with yourfriends. They’ll be better for it, and so will you.Think of Peter in the Bible. How did he feel when Jesus had been led away to His death? That fear musthave been crippling – not just for the future, but for Peter’s own safety. He feared that if he admitted hewas associated with Jesus, that he might too be taken away and tortured to death. At first he gave in tohis fear. But then he repented and God used him mightily throughout the rest of his life.Judas, on the other hand, gave in to his guilt and torment. He had no hope. And his outcome wasdisastrous.Think about that comparison for a moment. What will happen the next time you find yourself in apotentially fearful situation? Will you follow Judas’ example? Or Peter’s? Where will your focus be?Remember that God is the One who holds the world in His hands. Nothing happens that takes Him bysurprise. He is in control; He is our confidence. He is the author of your life and He knows the outcomeand has only good things planned for you!So take your eyes off those holes…… and choose to look instead at the donut!Ask yourself…• Will I be a pessimist, always looking at the hole…..?? Or will I choose to spend my time looking at the donut, with Christ by my side?“Though our “Thou wilt keep himfeelings come in perfect peace,and go, God’s whose mind is stayed on thee: love for us because he trusteth does not.” in thee.” ~C.S. Lewis (1 Corinthians 15:58)20