ASSIGNMENT

Surname Mdhlalose

First Name/s Dickson Scotch

Student Number 128115

Subject Managerial Economics

Assignment Number 1

Tutors Name

Examination Venue Johannesburg

Date Submitted 15 August 2016

Submission () First Submission

.resubmission
4418 Phase 4 Kwa Guqa
Postal Address Emalahleni

Mpumalanga

1034

E-Mail 128115@students.mancosa.co.za
(Work) 011 355 8395
Contact Numbers (Home) 073 5986 397

(Cell) 073 5986 397

Course/Intake Master of Business Administration (MBA9) Year One Jan 2016

Declaration: I hereby declare that the assignment submitted is an original piece of work produced by myself.

Signature: DS Mdhlalose Date: 15 August 2016

 CERTIFICATION

This is to certify that this assignment entitled: The reduction and the upswing of Apple
Inc.: influences impelling the firms progression. submitted in partial fulfilment of the
requirement for the award of the degree of Master of Business Administration (MBA) in
Strategic Management to MANCOSA Graduate School of Business, is my own work:

I have acknowledged the use of anothers ideas with accurate citations.

If I used the words of another (e.g., author, instructor, information source), I have
acknowledged this with quotation marks (or appropriate indentation) and proper
citation.
I have checked my work against my notes to be sure I have correctly referenced all
direct quotes or borrowed ideas.
My bibliography includes only the sources used to complete this assignment.
This is the first time I have submitted this assignment (in whole or in part) for credit.
Any proof reading by another was limited to indicating areas of concern which I then
corrected myself.
This is the final version of my assignment and not a draft.
I have kept my work to myself and did not share answers/content with others, unless
otherwise directed by my instructor.
I understand the consequences of violating the Universitys academic integrity
policies as outlined in the Code of Behaviour on Academic Matters.
By signing this form, I agree that the statements above are true. If I do not agree with the
statements above, I will not submit my assignment and will consult the course instructor
immediately.

Student name: 128115

Signature: DS Mdhlalose Date: 15 August 2016

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 Table of contents

Table of contents iii

Abstract v

List of tables vi

List of figures Error! Bookmark not defined.

List of acronyms and abbreviations vii

Definition of Key Terms viii

SECTION A 1

1. INTRODUCTION 1

1.1 ECONOMIC GROWTH 2

1.2 SOURCES OF ECONOMIC GROWTH FOR RWANDA POST GENOCIDE 3

2. OVERVIEW OR BACKGROUND 7
2.1 STRATEGIES THE GOVERNMENT OF RWANDA USED TO GROW OUT OF POVERTY

2.2 MAIN PROBLEMS FACING RWANDA POST-GENOCIDE 10

SECTION B 12

3. GALLO RECORD COMPANY SOUTH AFRICA 12

3.1 GALLO RECORDS CD OUTPUT, CD PRICE AND ECONOMIC PROFITS 12

3.2 OPTIMAL OUTPUT AND PROFIT LEVELS 14

3.3 THE FACTORS AFFECTING THE PRODUCTION OF COMPACT DISK (CD) IN

SOUTH AFRICA 15

4. COLLECTIVE BARGAINING 17

4.1 LABOUR UNION PARTICIPATION A CAUSE OF HIGH UNEMPLOYMENT 17

4.2 LABOUR MARKET CONDITIONS GRAPH 22

4.2.1 EQUILIBRIUM WAGE: 22

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4.2.2 THE EQUILIBRIUM WAGE RATE IS R5 AS GRAPHICALLY DEPICTED. 23

4.2.3 NUMBER OF WORKERS WHO LOST JOBS: 23

4.2.4 ADDITIONAL WORKERS IN NEED OF JOBS 23

4.2.5 QUANTITY UNEMPLOYED 23

5. CONCLUSION 24

6. BIBLIOGRAPHY 25ERROR! BOOKMARK NOT DEFINED.

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 Abstract

Eighteen years after the genocide that made Rwanda international news, but left abandoned by the
west, the country has achieved a miraculous change of fortunes. Rwanda has been described as a
country, which has successfully existed from violence. Rwanda has not experienced serious internal
insecurity since the events of 1994 and a minor insurgency in 1997-8.

This report/assignment aims to; explain what is meant by economic growth in Rwanda case.
Discuss the sources of economic growth for Rwanda post 1994 genocide. Discuss the strategies
used by the government of Rwanda to grow out of poverty. Discuss the main problems facing
Rwanda post-genocide, Focus on Gallo Record Company in South Africa and will discuss
unemployment in South Africa.

It has been more than 20 years since the demise of Apartheid in 1994; still unemployment remains
persistently high in South Africa. Since 1994, the economy has been showing signs of growth but
unemployment remains high. The official unemployment rate in South Africa is at 26.7% in the first
three months of 2016, but the expanded definition of unemployment is about 10% points higher at
36.3%. Depending on the definition, there are 5.7-million or 8.9 million unemployed South
Africans.

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 List of tables

Table 1: South Africa Unemployment Rate. 18

List of figures

Figure 1: Unemployment in a perfectly competitive labour market with the presence of minimum
wage. 19

Figure 2: Demand and supply for labour market conditionsError! Bookmark not defined.
22

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 List of acronyms and abbreviations

GDP Gross Domestic Product

RPF Rwandan Patriotic Front
EAC East African Community
GNP Gross National Product
US$ United States Dollar
TI Transparency International
FDI Foreign Direct Investment
PCC Pretoria Portland Cement
EDPRS Economic Development and Poverty Reduction Strategies
ICT Information and Communications Technology
RGS Rwanda Governance Scorecard
CD Compact Disk
Q Quantity
P Price
MC Marginal Cost
MR Marginal Ratio
TC Total Cost
TR Total Ratio
FET Further Education Training
HE Higher Education
Stats SA Stastitics South Africa

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 Definition of Key Terms

Economics: is the study of how best to allocate scarce resources among competing uses (Schiller,

Hill, & Wall, 2013).

Economic Growth: is the annual rate of increase in total production or income in the economy (this

definition is qualified in two important aspects, 1st the production or income should be measured in

real terms, 2nd the figures should also be adjusted for population growth). This means that economic

growth should be expressed on a per capita basis (Mohr, Fourie and Associates, 2008).

Factors of Production: resource inputs used to produce goods and services, such as land, labour,

capital, and entrepreneurship (Schiller, Hill, & Wall, 2013).

Gross Domestic Product (GDP): the total value of all final goods and services produced annually

within the boundaries of South Africa, whether by SA or foreign-supplied resources (Van

Rensburg, McConnell & Brue, 2011).

Strategy: is a plan, method or series of actions designed to achieve a specific goal or effort (Louw

& Venter, 2010).

Compact Disc: is an optical media storage device, originally developed by Phillips and Sony and

introduced as CD-Digital Audio (CD-DA) in 1982.

Unemployment: According to Schiller (2008), unemployment is the inability of labour-force

participants to find jobs.

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SECTION A

1. INTRODUCTION

Rwandas apparent stability depends in large part on the governments main ruling party, the
Rwandan Patriotic Front (RPF), which won Rwandas civil war and ended the genocide, and
in particular increasingly on its present leadership under president Paul Kagame. Together
they have charted a path for Rwanda of their own making, and are understandably sensitive
to outsider views on their choices given international indifference to the countrys plight in
1994.

Rwandas genocide was facilitated by several longstanding structural and historical

vulnerabilities, but precipitated by other, shorter-term macro-political events. The most
important historical factor predisposing Rwanda to inter-group conflict was an ethnically
divided society in which power had become paralleled with one ethnic group to the
exclusion of the other.

Compact Disc is a digital data storage format, co-developed by Philips and Sony. The
format was initially developed to store and play only sound recordings but was later
modified for storing of data Compact Disc Read-Only Memory (CD-ROM).

As South African economy has been showing moderate, positive growth in the past 20
years, employment growth remains slow therefore one can conclude by saying that
employment growth is not rapid enough to absorb the new labour force entrance, as a result
this lead to high unemployment rate.

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1.1 ECONOMIC GROWTH

Rwanda, a former Belgian colony, grew its economy by 8% in 2012, making it the strongest
performer in the East African Community (EAC), the regional intergovernmental
organization of Burundi, Kenya, Rwanda, Tanzania and Uganda, and one of the fasted-
growing frontier markets in the world of today.

Economic growth is defined as an increase in the production and consumption of goods and
services, economic growth occurs when there is an increase in the multiplied product of
population and per capita consumption, and is often and generally indicated by increasing
real Gross Domestic Product (GDP) or real Gross National Product (GNP). Schiller (2008)
defines economic growth as an increase in output (real Gross Domestic Product (GDP))
on expansion of production possibilities.

Economic growth in Rwanda is defined in terms of an increase in GDP per capita increased
from US$ 212 in 2001 to US$ 540 in 2010 and to US$ 644 in 2012. In 2008 more than
3000, firms registered, up from average of 700 in previous years. As of 2009 the number
rose to 6905 firms and in 2010 the government managed to register 18 447 new businesses.
This shows a notable economic growth in Rwanda as depicted by a rise in figures of
registered firms annually.

In 2012 the Foreign Direct Investment (FDI) increased by 50% to US$ 159.8 million.
Rwanda continual to relish investor confidence from foreign investment that came from
Singapore-based Nandan Agro-processing industries Ltd, and South African cement
manufacturer, Pretoria Portland Cement PPC. Rwandas strong GDP growth is driven
largely by the service sector, which accounted for 48% of GDP growth in 2012. Tourism
became the largest foreign exchange earner for Rwanda securing US$ 281.8 million in 2012,
an increase of US$ 30 million compared to 2011.

An economys growth rate is determined by the rate of increase in the use of capital, labour
and other factors of production, and the efficiency with which these factors are used
(Faulkner & Loewald, 2008). Rwandan economic growth case offers an instance of where
growth trends improved due to political change, in this case a transition to democracy.

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1.2 SOURCES OF ECONOMIC GROWTH FOR RWANDA POST GENOCIDE

According to Rensburg, McConnell and Brue (2011:387) society can increase its real output
and income in two fundamental ways: by increasing its inputs of resources, and by
increasing the productivity of those inputs. Increase in land, labour, capital and
entrepreneurial resources yield additional output.

Economic growth is calculated as a percentage rate of growth per quarter (three-month

period) or per year. It can also calculated with the size of the population. Real GDP per
capita (or per capita output) is found by dividing real GDP by the size of the population
(Rensburg, McConnell, & Brue, 2015). Rwandas GDPs growth is driven by service sector
and agricultural commodities, Rwanda sources of economic growth are discussed as
follows:

Good governance: Rwandas miraculous recovery was its effective leadership, through
Paul Kagame as the president of Rwanda managed to curb bribery successfully,
instituted rule of law and reduce street crime in conjunction with his government. Mr
Paul Kagame as the leader of Rwandan Patriotic Front army ended the genocide when he
took control. As a result, corruption is on the decline therefore the country enjoys fast
growing economy.

Gacaca courts: were presented as public centred public trials allowing victims to
confront accused perpetrators, if found guilty, the perpetrators were then taken to such
punishments as repairing homes, caving out agricultural terraces or tending the fields of
the victims family. These punishments focused on rebuilding the country of Rwanda, as
a result agricultural production increased and this have a positive impact on the
countrys GDP.

Effective leadership: Rwandas commitment to stamp out corruption in its quest to lift
the country out of poverty has earned recognition from the anti-corruption watchdog,
Transparency International (TI). Rwanda is listed as the least bribery-prone country in
East Africa, therefore this firmly underlines the pivotal role of effective leadership that
lifted Rwanda out of poverty and placed it on the path towards middle-income status.

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 Vision 2020 strategy: Rwanda government espoused a vision 2020 strategy in the year
2000 with the primary objectives of transforming Rwanda into a middle-income country
by 2020. The formation of a Vision 2020 strategy by the Rwandan government acted as
a source of economic growth. The major aim of this strategy was to transform the nation
to be in the middle-income country by 2020. Vision 2020, it seeks to release the
productive capacities of the Rwandan people and offer solutions adapted to the needs.

Policy implementation: Rwandas constitution is a remarkable piece of institutional

design as it recognises principles of ethnic equality, equitable power sharing and
democracy. Because of a shortage of foreign aid, Rwanda as a developing country that
has been recovering well following the 1994 Genocide started to implement its national
formulated policies as a way of ensuring economic growth.

These policies managed to maintain a robust growth in the country. the government has
financed some of the aid shortfall, through increased domestic borrowing, which spurred
economic growth by 8% in 2012, higher than the 7.4% growth rate projected in world
banks July 2012 Rwanda economic update, which was prepared prior to the shortfall of
aid.

Economic Development and Poverty Reduction Strategies (EDPRS): the establishment

of the EDPRS acted as a source of economic growth for Rwanda. This strategys focus
was aimed at growing the private sector, increasing exports, urbanisation and rural
development, increasing agricultural productivity, creating jobs with due respect to
youth, and improving efficiency in service delivery in both public and private sectors.
All of these aspects were aimed at ensuring the national economic growth.

Private sector: Private sector development acts as a source of economic growth in

Rwanda. Private sector development is to be spearheaded by entrepreneurship towards
attaining economic growth in Rwanda. It is the national objective to have a private
sector led development. The ultimate goal of the reform programme is a private sector
that promotes economic growth and job creation. This could be seen by an increase in
the number of registered private firms annually with 18447 new businesses in 2010
which was nearly about to achieve the set target of 20 000 for year 2010.

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 Domestic borrowing: promoted economic growth, as funds were made available to the
private sector, which has the major contribution to the GDP. The more the funds the
private sector obtains the higher the GDP. Private sector only needs a flexible access to
funding as a way of boosting its productivity. Services like communication and finance
benefited much through domestic borrowing in Rwanda.

Broadening of the services sector: The services sector of Rwanda contributed much to
the national economic growth. The sector accounted for 48% GDP growth in 2012 with
tourism having the largest foreign exchange earner with us$ 281.8 million in 2012. This
made the country to successfully diversify from commodity export to a successful
service offering. Other sectors, which brought a considerable contribution in economic
growth emanated from communications, education, public administration, storage and
transport.

Resourceful labour market: The existence of an efficient labour market acted as a source
of economic growth in Rwanda. With an efficient labour market, it means that there is
an equilibrium wage rate and equilibrium quantity of labour demanded and supplied.
Market factors determine the wage rate, which implies paying for what has been
produced. This promotes production as more labour demanded means more production,
thereby promoting economic growth in Rwanda.

Information and Communications Technology (ICT): A major driver of Rwandas strong

economic growth is the countrys promising ICT sector, which bolstered the business
climate. Rwanda government initiated the national ICT plan in 2000 in the hope of
transforming Rwanda into the Singapore of Africa..

Resources: Rwandas strong sources of economic growth are driven by service sector,
which accounted for 48% of GDP Growth in 2012. Tourism has been the largest source
of economic growth by the largest foreign exchange earner for Rwanda, securing US$
281.8 million in 2012, an increase of US$ 30 million compared to 2011.

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 Rwanda trades commodities such as coffee, cereals, tea and vegetables forming 77% of
overall exports and minerals 28% of the Rwandan GDP in 2012. These agricultural
commodities and minerals certified and endorsed economic growth in Rwanda. The
nation has innumerable of resources, which makes it to attain a successful economic
growth on an overall basis.

Rwanda has shown how to lift itself out of poverty and failure through reconciliation,
unification as well as defined and clear economic growth goals. Rwanda sources of
economic growth regarding the imports to the country were China (12.7%), Uganda
(14.1%), Kenya (8.3%) and India (8%). These countries acted as source of economic
growth to Rwanda as they import goods and services to the country.

Foreign Direct Investment (FDI): FDI in Rwanda forms one of the sources of economic
growth. The Rwandan governance scorecard acted as a tool of attracting foreign direct
investments. Factors such as transparency, and accountability, good quality of service
deliverance, economic and good corporate governance attracted foreign investors.

Political rights and civil liberties in Rwanda indicate democracy by attracting FDI
since they are certain that their rights and interests are secured, therefore FDIs in
Rwanda increased by 50% to USD 159.8 million in 2012 due to a deepening investor
confidence. These foreign investments came from Singapore based Nandan Agro-
processing industries Ltd and South African cement manufacturer, Pretoria Portland
Cement.

Rwandas governance reforms, anti-corruption and vision 2020 initiatives have paid off,
evidenced in the World Economic Forums (WEF) global competitiveness report 2012-
2013, which ranked Rwanda 63 among 144 countries, and third among sub-Saharan
African countries, behind South Africa and Mauritius.

Rwandas commitment to stamp out corruption in its quest to lift the country out of
poverty has earned recognition from the anti-corruption watchdog, Transparency
International. Concerning all the transformation Rwanda has gone through, still has a long
way to go, as the majority of its people are still living below the poverty line, and the
country requests to explore other sources of revenue to finance its budget to cut reliance on
foreign aid.

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2. OVERVIEW OR BACKGROUND

2.1 STRATEGIES THE GOVERNMENT OF RWANDA USED TO GROW OUT OF

POVERTY

A companys strategy is managements action plan for running the business and conducting
operation (Hough, Thompson, Strickland III, & Gamble, 2011). Thus the crafting of a
strategy represents a managerial commitment to pursue a particular set of actions in growing
the business, attracting and pleasing consumers, competing successfully, conducting
operations, and improving the companys financial and market performance.

The Government of Rwanda strategy is about how it intends to grow its economy, How its
functional pieces of business namely: research and development, supply chain activities,
production, sales and marketing, distribution, finance, and human resources) will be
operated, and how its economy will be boosted Hough et al. (2011). Strategies that Rwandan
Government deployed to grow out of poverty are being discussed as follow:

Good Governance: Through good governance, a strong anti-corruption campaign, and

clear economic vision buoyed by effective use of foreign aid, Rwanda has lifted itself
out of extreme poverty and put itself on a trajectory toward greater self-sufficiency. As a
result, the World Bank projects GDP growth in 2013 of 7%, which would make Rwanda
the ninth-fastest growing economy in the world.

Regulatory Policies: Rwandan government has moved quickly to implement policies that
have maintained robust growth in the economy. The Government has financed some of
the aid shortfall, through increased domestic borrowing, which in turn spurred economic
growth by 8% in 2012, higher than the 7.4% growth rate projected in the World Banks
July 2012.

Vision 2020 Strategy: Vision 2020 strategy: Rwanda government espoused a vision
2020 strategy in the year 2000 with the primary objectives of transforming Rwanda into
a middle-income country by 2020. As a result, vision 2020 identifies six interwoven
pillars: good governance, efficient state, skilled human capital, vibrant private sector,
excellent physical infrastructure, and modern agriculture and livestock.

Therefore, it seeks to release the productive capacities of the Rwandan people and offer
solutions adapted to the needs.

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 Information and Communications Technology (ICT): ICT is a major driver of Rwandas
strong economic growth is the countrys promising Information and Communications
Technology (ICT) sector, which bolstered the business climate. Rwanda government
initiated the national ICT plan in 2000 in the hope of transforming Rwanda into the
Singapore of Africa.

Economic Development and Poverty Reduction Strategies (EDPRS): Government of

Rwanda initiated a series of programmes aimed at realising its vision 2020 targets,
notably EDPRS was implemented. The focus of this strategys is growing the private
sector, increasing exports, urbanisation and rural development, increasing agricultural
productivity, creating jobs with due respect to youth, and improving efficiency in
service delivery in both public and private sectors. All of these aspects aimed at ensuring
the national economic growth.

Rwanda Governance Scorecard (RGS): Rwandan Government in July 2013, launched

the RGS 2012, to measure governance along eight indicators, namely rule of law;
political rights and civil liberties; participation and inclusiveness; safety and security;
investing in people; control of corruption, transparency and accountability; quality of
service delivery; and economic and corporate governance. The eight categories of the
governance scorecard are critical to attracting FDI into Rwanda, as they collectively
present a holistic measure of good governance and transparency.

Effective Leadership: Rwandas president, Paul Kagame whose Rwandan Patriotic Front
army ended the genocide when he took control in 1994. His pro-Western government
has successfully curbed bribery, instituted the rule of law, and reduced street crimes and
discouraged the use of terms Hutu and Tutsi. As a result, Rwanda was at peace again,
there was lack of corruption, and this contributed to the fast growing economy of
Rwanda.

General Budget support: was designed by the Rwandan Government to contribute to the
implementation of generic goals as set in Rwandas national development or poverty
reduction strategy, whilst sector budget support was designed to accelerate progress
towards the partner governments sectoral goals.

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 Gacaca: was an innovative and largely indigenous response by the Rwandan government
to a highly unusual challenge; Gacaca courts were introduced as community based
public trials allowing victims to confront accused, if found guilty, the perpetrators were
then taken to such punishments as repairing homes, caving out agricultural terraces or
tending the fields of the victims family. These punishments were engrossed on building
the economy with cheap labour. As a result, Agricultural production increased hence
increasing GDP. This abridged poverty including the poor communities.

Macroeconomic policies: Rwanda has followed a course of prudent macroeconomic

management, effective use of foreign aid, and sound fiscal and monetary policies, all of
which have underpinned its strong economic performance, and increased its resilience
during a period of global economic turbulence. Government of Rwanda has moved
quickly to implement policies that have maintained robust growth in the economy.

Agricultural Growth and Diversification: As a technique of dropping poverty in Rwanda,

the government implemented strategies to achieve sustained agriculture growth. The
strategies include removing restrictions on trade and allowing the growth of market
centres; reducing risk by promoting proper inter-cropping practices; promoting animal
husbandry to diversify agriculture and help to replenish soil nutrients; and increasing
food security through research and extension in high-yield food crops.

The following strategies had the greatest influence towards the reduction of poverty in
Rwanda as the all have a positive impact on Rwandan economy: Vision 2020 strategy,
Macroeconomic policies, Agricultural Growth and Diversification, Gacaca, Rwanda
Governance Scorecard, Economic Development and Poverty Reduction Strategies, and
Good Governance.

Rwandas governance reforms, anti-corruption and Vision 2020 initiatives have paid off,
evidence in the World Economic Forums (WEF) Global Competitiveness Report 2012-
2013, which ranked Rwanda 63 among 144 countries and third among Sub-Saharan
countries. This shows that Rwanda benefits strong and well-functioning institutions, a good
security environment and efficient labour markets.

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2.2 MAIN PROBLEMS FACING RWANDA POST-GENOCIDE

Rwandas post-genocide rebirth and subsequent economic achievements present a strong

example for other countries that have suffered the wreckage of human-induced catastrophe
to emulate. Despite the impressive economic achievements of post-genocide Rwanda,
economy still faces some challenges and in this section, those challenges are discussed as
follows.

Underdevelopment: Despite the large reduction in poverty over the past decade,
Rwanda remains a severely under-developed country, with high inequality and
around 60% of the population living below the poverty line. This means that Rwanda
as a country does not provide equal opportunities and lacks competition as it economy is
monopolistic.

Rwanda Population: The genocide resulted in Rwandas GDP falling by 50% in 1994. It
also left the entire population, both survivors and perpetrators, traumatized, regarding
the refugees, of up to 1 million people who had been pushed into exile returned.

Restrictions of population movements: Limitations on population movements and on

urbanisation have impeded the development of market centres, which are essential for
developing a cash economy where resources are used most efficiently. This has
increased poverty by limiting options for the poor and has reduced the potential
for economic growth.

Domestic Revenue: Rwanda domestic revenue is still insufficient to finance the

countrys annual budget and Vision 2020 plans.

Allegations: Rwandas foreign aid support has been threatened following allegations that
Rwanda has been financing rebels in the DRC, as many Rwandan refugees who fled the
genocide remain in the DRC. As a result, the UK, the second-largest bilateral contributor
to Rwanda after the US, has frozen, unfrozen and then refrozen its aid, worth US$ 120
million a year; Other European governments have also stopped or reduced their
contributions. The aid shortfall is likely to derail economic growth in the medium term
and frustrate Rwandas growth initiatives.

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 Currency Depreciation: The results in aid flows has hampered the ability of the central
bank, the National Bank of Rwanda, to continue meeting market demand for foreign
exchange, contributing to the Rwandan franc s depreciation of 4.5% against the US
dollar in 2012, after depreciation of 1.6% in 2011. Domestic borrowing had a negative
impact to Rwanda as the cost of this growth has a sharp increase in interest rates due to
raised domestic borrowing and a shortage of foreign currency led to the depreciation of
Rwandan Franc.

External foreign exchange reserves also declined by 18.1% as the central bank attempted
to meet market demand for foreign exchange. The Rwandan government cannot
indefinitely draw down its foreign reserves and increase domestic borrowings.
Consequently, home-grown solutions to generate state revenues remain critical to
execute its budget and Vision 2020 initiative.

External Funding Reliance: Despite the impressive economic achievements of post-

genocide Rwanda, the economy still relies heavily on foreign aid, as foreign donors
finance 48% of Rwandas budget. The majority of foreign aid is from general budget
support donors, namely the World Bank, European Union (EU), African Development
Bank (AfDB), United States (US), Germany and the United Kingdom (UK), and two
sector budget support donors, Belgium and Netherlands.

This becomes a challenge for Rwanda as their local monetary authorities will not be
able to implement its internal policies as their budget support donors will manage
their funds utilizing their own financial systems and procedures.

Stability based on economic growth and strong leadership is not sustainable in the end as
economies will fluctuate and leaders must change (McDoom, 2011). It is in Rwanda
strategic long-term self-interest therefore to reverse the current trend and increase the
political space in order to permit civil and political society to evolve responsible and
independent.

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SECTION B

3. GALLO RECORD COMPANY SOUTH AFRICA

3.1 GALLO RECORDS CD OUTPUT, CD PRICE AND ECONOMIC PROFITS

TR=20Q -0.000006Q2
MR=MTR/MQ=20-0.000012Q
TC=6 187 500 +2.5Q+0.00000275Q2
MC=MTC/MQ=2.5+0.0000055Q

Monopoly market condition:

CD output:
The profit maximising level is where:
MR = MC
20 0.000012Q = 2.5 + 0.0000055Q
20 2.5 = 0.0000055Q + 0.000012Q
17.5 = 0.0000175Q
17.5/0.0000175 = Q
Q = 1 000 000

Gallos record CD output is 1 000 000 units.

CD price:

TR = Q P
20Q 0.000006Q2 = 1 000 000 P
20(1000000) 0.000006(1000000)2 = 1000000P
20 000 000 6 000 000 = 1000000P
14 000 000 = 1000000P
P = 14 000 000/1000000
P = 14
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 CD price is R14 each
Economic profit:

= TR TC
= (20Q 0.000006Q2) (6187500 + 2.5Q + 0.00000275Q2)
= [20(1000000) 0.000006(1000000)2] [6187500 + 2.5(1000000) +
2
0.00000275(1000000) ]
= (20 000000 6 000 000) (6187500 + 2 500 000 + 2 750 000)
= 14 000 000 11 437 500
= 2 562 500

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 3.2 OPTIMAL OUTPUT AND PROFIT LEVELS

P = MR=R10.75

Optimal output:

P = TR/Q
10.75 = (20Q 0.000006Q2)/Q
10.75Q = 20Q 0.000006Q2
10.75Q 20Q = - 0.000006Q2
- 9.25Q = -0.000006Q2
0.000006Q2 9.25Q= 0
Q (0.000006Q 9.25) = 0
Either Q=0 or 0.000006Q = 9.25
0.000006Q = 9.25
Q = 9.25/0.000006
= 1 541 666.67

Profit level:
Economic profit
= TR TC
= (20Q 0.000006Q2) (6187500 + 2.5Q + 0.00000275Q2)
= [20(1541666.67) 0.000006(1541666.67)2] [6187500 + 2.5(1541666.67) +
0.00000275(1541666.67)2]
= (30 833 333.4 14 260 416.73) (6187500 + 3 854 166.68 + 6 536 024.33
= 16 572 916.67 16 577 691.01
= -4 774.34
Loss of R4 774.34
This is not a stable equilibrium as it results in a loss.

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3.3 THE FACTORS AFFECTING THE PRODUCTION OF COMPACT DISK (CD) IN
SOUTH AFRICA

The Compact Disc (CD) was originally established as a scheme for the storage and replay
of digitally encrypted audio. Compact Disc technology was developed by Philips in 1979.
The output of the entire economy is limited; the limits are set by the resources available for
producing goods and services. According to Schiller (2008; 4) every nation has to grapple
with the core problem of scarcity the fact that there arent enough resources available to
satisfy all our desires.

Once a decision has been taken about what goods and services should be produced, the
next question is how these goods and services should be produced (Mohr, Fourie and
associates: 2008:22) and therefore production factors needs to be taken into consideration.

Schiller (2008: 33) defines factors of production as resource inputs used to produce goods
and services such as land, labour, capital and entrepreneurship. There are four main factors
that affect production of Compact Discs (CDs), and are discussed as follows:

Land: Denotes to all natural resources such as crude oil, water and air (Schiller 2008:4).
In South Africa there are a large areas with little or no agricultural or mineral value but
there areas that are rich in minerals, therefore the availability of resources in South
Africa affects the production of CDs since the availability of resources are fixed in
supply and cannot be increased.

Capital: Refers to the final goods produced for use in further production (Schiller
2008:4). To produce capital goods, current consumption has to be sacrificed in favour
of future consumption (Mohr et al. 2008:23). The equipment and machinery used to
produce CDs in South Africa becomes outdated now due to technological progress,
therefore provision has to be made for the replacement of existing capital goods.
Productivity relies on the finance factors. Finance is the life-blood of modem business
(Schiller, 2000). There should be a better control over both fixed capital and working
capital.

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 Entrepreneurship: entrepreneurs are seen as innovators, developing new ways to
produce new products and services in a planned economy (Mohr et al. 2008:24). In
South Africa there is a low number of entrepreneurship and therefore the economic
growth is very low and this has a negative impact on the production of CDs.
Entrepreneur is the driving force behind production as they see the opportunity for new
or better products and they bring resources needed for Producing CDs.

Labour: Goods and services cannot be produced without human effort (Mohr et al.
2008:22) Therefore labour is defined as the exercise of human mental and physical
effort in the production of CDs. South African population is dominated by the
unskilled labour workforce therefore the knowledge and skills possessed by the
workforce have an effect on the production of CDs resulting to low productivity.

There are other several factors that affect the production of CDs in South Africa, and these
factors are discussed as follows:

Production of CDs in South Africa is affected by law and order situation, infrastructure,
market, sources of raw material, high cost of labour and skilled workforces (Schiller,
2000). Productivity of CDs in South Africa largely depends on technology, as a results
technical factor determine the production of CDs and this includes plant and machinery,
research and development.

Mohr et al (2010) states that Government factors are broad of the effect of political events
on the production of CDs. Schiller (2013) states that when the government owns the
factors of production, imposes high taxes, or regulates the outputs, therefore as a result
there is a slight occasion or incentive to project improved products or pursue new
technology.

Productivity is directly proportional to the organizational factors (Schiller, 2000). Conflicts

between line and staff affect the production of CDs. Incompetent management is the most
major element that raises CD productiveness. Therefore managers lowly judgment, skills
and willingness to take risks affect the CDs productivity levels in South Africa.

Schiller (2013) states that no matter how an economy is organized, theres a limit to how
much it can produce, the most evident of limit is the amount of resources available for
producing goods and services and the quantity of CDs demanded.

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4. COLLECTIVE BARGAINING

4.1 LABOUR UNION PARTICIPATION A CAUSE OF HIGH UNEMPLOYMENT

In consideration of the political conversion in 1994, South Africa has observed the
hastening of its previously high unemployment rate, as an outcome mounting of
unemployment is a foundation of significant anxiety to both policy makers and labour
market participants (Burger & Fintel, 2009). The causes of unemployment in South Africa
vary, there are too many causes of unemployment in South Africa (Hendriks 2016), and
therefore Labour Union participation is not the only cause of high unemployment in South
Africa.

Rust (2001) as quoted by Uys (2011) states that Trade Unions have the potential to
mobilise labour in a collective unit and in doing so this decrease the extent of decision
making autonomy.Labour Relations Act (66 of 1995), (LRA) Section 213, defines a Trade
Union as an association of employees whose principal purpose is to regulate relations
between employees and employers, including any employers organization.

Two standard definitions of unemployment are adopted by Stats SA, namely the narrow
definition and broad definition of unemployment. Individuals were defined as narrowly
unemployed if they: (i) did not work during the seven days prior to the interview, (ii)
wanted to work and would accept a job if being offered one , and (iii) had taken active
steps to look for work or to start a business in the four weeks prior to the interview. Those
who only met the first two requirements above were defined as discouraged work seekers,
and are classified as inactive under the narrow definition but unemployed under the broad
definition (Hendriks, 2016).

According to StatsSA (2016), South Africa's unemployment rate imprecisely reduced to

26.6 percent in the June quarter of 2016 from 26.7 percent in the three months to March.
The number of unemployed fell by 1.6 percent and employment went down 0.8
percent. For people who have discontinued searching for work enlarged unclearly to 36.4
percent from 36.3 percent see Table 1.

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 Table 1: South Africa Unemployment Rate

Source: www.tradingeconomics.com statistics South Africa 2016

Barker,(2007) as quoted by Hendriks (2016) states that since there is high pressure put on
employers to hire permanent labour at a high wages which in turn increase labour costs,
employers are somewhat forced to convert capital-intensive industries. As a result, this has
a negative impact on the South African labour market. Bhorat and Van der Westhuizen
(2009) as cited by Hendriks (2016) argue that the unions have too much power specifically
in South Africa.

Trade Unions have the power to raise wages therefore they have a capacity of transforming
the labour market into a monopoly, rather than a competitive market with many buyers
(employers) and sellers (employees), as a result there are many buyers but only one seller
which is the union (Schiller, 2000). Comparable slightly to a monopoly market (monopoly
market is defined as a market covering a solitary firm that has or is adjacent to entire
governor of the sector), the grades will be at equilibrium with higher prices and lower
supply than in the competitive equilibrium. In relation to the labour market, this indicates
that wages will be higher, and this will have a negative effect on employment as
unemployment will be higher too.

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 Figure one (1) demonstrates the modest labour demand and labour supply structure in a
faultlessly competitive labour market (Hendriks, 2016). Equilibrium takes place when the
labour supply and labour demand curves interconnect (free market wage). The introduction
of a minimum wage, which is overhead the market defrayal wage level, which in turn will
guide to employment loss for the reason that quantity of labour supplied exceeds the
quantity of labour demanded.

Figure 1: Unemployment in a perfectly competitive labour market with the presence

of minimum wage.
Source: Hendriks (2016, 11)

Unions compel the employers for higher wages and better working conditions which
eventually increase labour cost, and employees have too many rights, this result employers
hiring employees temporarily through labour brokers or not hiring at all (Hendriks, 2016).
This is more heightened by the severe labour laws in South Africa. As a consequence of
these factors it is hard to address the issue of unemployment in South Africa.

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 Most economists from the demand side debate that markets generate unemployment on
their own, and as a result are unable to utilize all the skills presented to it. Hence,
unions are indispensable since they guard the privileges of workers, increase pay and
benefits as well force employers to be fairer (Parkin, Powell, & Matthews, 2008). This
reduces unemployment because these higher wages are spent and create jobs. Supply side
economists hold that the market is the most rational institution in economic life.

There is a market for labour just as there is a market for goods and services. Workers get
paid based on what the market requires at any given time, skills are marketable objects.
Bhorat, Meyer and Mlatsheni (2002) as quoted by Hendriks (2016) argue that there is
unanimity that skill shortages are foremost impediments to economic growth and job
formation in South Africa. A high level of unemployment is a replication of a skills
mismatch.

According to Faulkner & Loewald (2008), the structure of the economy has advanced in
reaction to technological vagaries, the demands of production and developments in the
global economy, growing the need for higher-level skills. Where the pool of skills in South
Africa is restricted in the short term. These lacks are the effects of the interchange of
numerous compound socio-political and economic factors, many of which are the
inheritance of the apartheid regime (Tshilongamulenzhe, 2012).

South African government disburse roughly 6 to 7 percent of its GDP on education,

nonetheless the system is not producing the correct set of skills (Tshilongamulenzhe,
2012). Deprived quality of education, with massive effects rising at Further Education and
Training (FET) and Higher Education (HE) sectors affects the South African labour
market, as the country lacks skills and innovation.

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 South African informal sector is minor which only accounts 30% of total employment
(Hendriks, 20116). Researchers argued that numerous factors inhibit the unemployed to
cross the threshold of informal sector: credit, lack of capital, crime and training facilities.
Trade Unions have intercede the South African labour market to stimulus national
economic and social policies in the track of a pro poor and employment producing path,
facilitating job creation through skills development, and direct job creation (Mwilima,
2008).

South African history of race discrimination has designed the operational of the labour
market and therefore created a structural element to the employment mystery that has a
nearly permanent effect on the supply cost of labour (Faulkner & Loewald, 2008).
Confirmed characteristics of labour legislation are vastly deterring by global standards,
therefore rigors linked with arbitration processes and in policies and legislation leading the
hiring and firing of workers serve as problems to employing new workers (Soko &
Balchin, 2014).

Many researchers argue that the rate of high unemployment in South Africa is not caused
by one factor therefore; one should consider all the various factors that contribute to
unemployment when explaining the causes of unemployment in the South African labour
market. Soko & Balchin (2014) conclude by stating that the main causative feature to the
unemployment experiments in South Africa is the contemporary formal of the republics
labour market establishments and governing atmosphere. The direction of future
employment policy is unclear, but economists do not expect the high rates of
unemployment to decline in the near future.

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 4.2 LABOUR MARKET CONDITIONS GRAPH

4.2.1 EQUILIBRIUM WAGE:

Surplus

Shortage

Figure 2: Demand and supply for labour market conditions.

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4.2.2 THE EQUILIBRIUM WAGE RATE IS R5 AS GRAPHICALLY DEPICTED.

4.2.3 NUMBER OF WORKERS WHO LOST JOBS:

= Equilibrium quantity quantity demanded after the government initiative

= 40 35
=5

4.2.4 ADDITIONAL WORKERS IN NEED OF JOBS:

= Quantity supplied after government initiative equilibrium quantity
= 50 40
=10

4.2.5 QUANTITY UNEMPLOYED:

= Quantity supplied after the government initiative quantity demanded after government
initiative
= 50 35
= 15

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5. CONCLUSION

Rwandas genocide represents a hypothetically deterrent fiction in global conflict resolution.

Rwandas development accomplishment is delicate as it depends on the sustained rule of the
winning party to Rwandas civil war, the Rwandan Patriotic Front, and its Chairman,
President Paul Kagame.

Production possibilities examination infers that a singular nation is limited to the

amalgamations of output directed by its production possibilities curve. Some economists
argue that there are only two factors of production, which is land and labour. Land they say
is adopted from aids of nature by human labour and entrepreneur a distinct diversity of
labour. Land and labour as a result are primary factors while capital and entrepreneur are
secondary factors.

Conducting with South Africas massive unemployment and its effects on economic growth
will need key structural modifications to the labour market and its foundations. South
African market conditions are far from practicality, government working with common
associates struggles to treasure supportable determinations.

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6. BIBLIOGRAPHY

Burger, R. and Von Fintel, D. 2009. Determining the causes of the rising South African
unemployment rate: An age, period and generational analysis.Economic Research Southern
Africa (ERSA). Working Papers, No. 158, ERSA, Cape Town. December.

Faulkner, D. and C. Loewald (2008) Policy Change and Economic Growth: A Case Study
of South Africa, Commission on Growth and Development, Working Paper No 41
(http://www.growthcommission.org/storage/cgdev/documents/gcwp041web.pdf).

Hendriks, J.F. 2016. Critical evaluation of possible policy options to reduce unemployment
in South Africa. Master of Economics. Thesis. University of The Western Cape.

Hough, J., Thompson Jr,A.A., Strickland III, A.J. and Gamble, J.E. 2011. Crafting and
Executing Strategy : creating sustainable high performance in South Africa. McGraw Hill:
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Louw, L., & Venter, P. 2010. Strategic Management: Developing Sustainability in Southern
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McDoom, O. 2011. Rwandas Exit Pathway from Violence: A Strategic Assessment.

Background case study for World Development Report 2011. Washington DC: World Bank.

Mohr, P., Fourie, L. & Associates, 2008. Economics for South African Students.4th Ed
Pretoria: Van Schaick.

Mwilima, N. 2008. The role of trade unions in job creation: a case study of the Job Creation
Trust. M.A. Thesis. Witwatersrand University.

Parkin, M., Powell, M. & Matthews, K., 2008. Economics. London: Addison Wesley.

Schiller, B. R., 2000. The Economy Today. Los Angels: Irwin.

Schiller, B.R., Hill, C.D., & Wall, S.L. 2013. The Economy Today. 13th Ed New York:
McGraw-Hill/Irwin.

Schiller, B.R. 2008. The Macro Economy Today. 11th Ed. New York: McGraw-Hill/Irwin.

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 Soko, M. & Balchin, N.2014, Breaking the deadlock: Tackling the South African labour
market crisis. Available http://www.gsbbusinessreview.gsb.uct.ac.za/breaking-the-deadlock-
tackling-the-south-african-labour-market-crisis/. [2016, August 10].

Statistics South Africa. 2016. Quarterly Labour Force Survey: Statistical release. P0211.
Pretoria: Statistics South Africa.

Tshilongamulenzhe, M.C. Enunciating the skills development challenge facing South

Africa. GSTF International Journal of Law and Social Sciences (JLSS) Vol.1 No.1, Jan
2012.

Uys.M. 2011. Factors influencing the future existence of trade unions in South Africa.
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