Definition of Socio-Economic Issues
Socio-economic issues are problems that result from certain aspects in society and the economy. They have a negative influence on both communities and businesses.
In South Africa, contemporary socio-economic issues include HIV/AIDS, poverty and unemployment. Businesses need to work with the government to address these problems.
HIV and AIDS
The Human Immunodeficiency Virus (HIV) is a virus that attacks the immune system. It can be transmitted through sexual behaviour and contact with infected blood. In its final stages, it can become the Acquired Immunodeficiency Syndrome (AIDS), a potentially life-threatening condition. More than 10% of South Africans are infected with HIV.
Economically, HIV/AIDS puts a strain on public healthcare, as the government has to spend millions on antiretroviral (ARV) drugs. Infected individuals can live with HIV for many years, but once their immune systems become weak, they become more vulnerable to diseases, which can decrease their productivity in the workplace.
Poverty is the state of not being able to fulfil one’s basic human needs such as food, water and shelter. It can be caused by many factors including unemployment, poor education, the lack of skills and scarcity of basic services. It can also lead to other social problems such as crime and violence.
More than half of South Africans live in poverty. For businesses, this means low sales, as poor consumers have little purchasing power. Poverty also puts pressure on businesses to help struggling communities out, which can become an extra expenditure.
By definition, an unemployed person is anyone between the ages of 15 and 64 (working age), who is actively looking for work but cannot find it. Before the Covid-19 pandemic of 2020, almost 25% of working-age South Africans were unemployed. Now, that number is probably higher.
Unemployment is one of the main causes of poverty, because individuals do not have a stable income to support their families with. It can lead to other social problems like crime and gambling.
The shortage of skilled labour is a major contributor to unemployment. Businesses struggle to find the right employees for positions, while some people struggle to find work because they lack certain skills.
The Skills Development Levy (SDL) and SETAs (Sector Education and Training Authority) were established to encourage skills development within the workplace, thus addressing the shortage of skilled labour. Skills development is one of the seven pillars of BBBEE. To comply, businesses must have programmes that improve the skills of black people internally and externally.
Inequality is the state of being unequal, in terms of rights, wealth, opportunity and social status.
South Africa has one of the most unequal distributions of wealth in the world. According to Webster (2019), the top 10% of South African earners claim 65% of the national income. The other 90% of the population shares the remaining 35% of the total income.
The country’s apartheid legacy is a major contributor to this imbalance. Although more than 26 years have passed since our entry into democracy, the government is still making efforts to redress the effects of the past.
Broad-based Black Economic Empowerment (BBBEE) is one of the efforts that the government is making to address inequality in business. Unfortunately, only a few black people have benefited from this. They have become very wealthy while the rest remain poor.
Inclusivity is about giving everyone the same opportunities, regardless of their social background.
Issues like prejudice and discrimination threaten inclusivity. They can cause tensions which reduce workplace productivity and employee satisfaction.
To encourage inclusivity in the workplace, the state instilled laws like the Employment Equity Act of 1998 and Promotion of Equality and the Prevention of Unfair Discrimination Act of 2000.
A crime is an act that is committed against the law. Its punishment is usually decided by the court. Examples of crime include theft, burglary, fraud, corruption, bribery, hijacking and abuse. It can happen within or outside the business.
South Africa has one of the highest crime rates in the world, and this threatens the economy. It can lead to businesses closing down and new businesses fearing to start up, thus limiting employment and poverty reduction opportunities. Ironically, poverty and unemployment are major incentives for crime.
At the same time, existing businesses are forced to spend more money on insurance and security in order to protect themselves.
Because of the high crime rates, international organisations like the Overseas Security Advisory Council warn travellers to avoid townships and Central Business Districts (CBDs) in South Africa. This undermines local tourism and township businesses.
Violence is the use of physical force to threaten or harm others. In South Africa, it can take the form of violent crimes, domestic violence, police violence, taxi violence, vigilantism, xenophobic attacks and gang wars.
It is the result of various socio-economic factors, including the frustration of living in poverty, the boredom of unemployment and so much exposure to violence that it becomes the norm.
Businesses that experience violent robberies take time to recover and lose productivity in the process. They might also have to pay for counselling to help their employees recover from the trauma. Retailers who get robbed at gunpoint lose customers for some time, as people fear the incident occurring again.
Political Disturbances and Labour Disputes
Political disturbances happen when workers or communities protest against the government, employers and social issues that concern them. They can also be violent irruptions like the xenophobic attacks of recent years.
In South Africa, protests often lead to violence, vandalism and looting. This can hurt local businesses, since it can result in the loss of stock, damaged property and traumatized employees.
Labour disputes occur when employers and employees disagree on the terms of employment. In South Africa, they can take the nature of strikes, go-slows and lockouts.
- A strike is when workers refuse to work and usually march against their employer.
- Go-slows occur when employees go to work but do their work much slower, as a form of protest.
- Lockouts are when employers refuse to allow their workers into the premises until the disagreements are resolved.
Labour disputes decrease productivity and can ruin relationships between employers and their workers. Since labour disputes can force businesses to close temporarily, sales can also take a dive.
Gambling is using money to take a chance at winning something. The likelihood of winning is usually little. Types of gambling include sports-betting, the lottery, scratch cards and pyramid schemes.
There are legal and illegal forms of gambling. Both offer lucrative business opportunities, but can be harmful to society and the economy. Some people get addicted and end up losing everything they have in the process. People can lose their businesses and sacrifice their basic needs for a chance at winning a bet.
For a chance at a better life, the poor can resort to gambling, and end up losing the little that they have. Thus, gambling can weaken the economy by reducing the spending power of consumers.
Piracy, Counterfeiting and Bootlegging
Piracy, counterfeiting and bootlegging all have to do with illegally making money out of someone else’s work or ideas.
Piracy is the illegal use of someone else’s product, invention or concept. This includes downloading or copying books, music and movies, whether for personal use or reselling. Piracy hurts the publishing and production industries by reducing their consumers.
Companies spend years developing products, then other people copy and sell them at cheaper prices. What is worse is that the original creators do not get anything from the pirated sales.
Organisations and individuals can protect themselves from piracy through copyrights, patents and trademarks.
A copyright is an exclusive right granted by law for a limited period to an author, designer, etc. for his or her original work. Unlike the other forms of intellectual property (patents and trademarks), a copyright does not need to be registered, except for films (movies, TV shows etc). The symbol © is used to show copyright.
A patent is a license that protects an inventor and allows them to exclude all others from making, using, or selling their invention or design for 20 years.
A trademark is a brand name, slogan or logo. It identifies the services or goods of one company and separates them from the goods and services of another. For registered trademarks, businesses can use the ® symbol next to their brand names, slogans or logos, or ™ for non-registered trademarks.
Counterfeit goods are imitation products. They look like the original goods but are made from cheaper materials. Examples of counterfeit goods are fake clothes, bags, shoes and money.
Bootlegging is the illegal production and sale of goods, especially pirated and counterfeit products. Businesses spend years building their brands and developing products. Counterfeiting and bootlegging bring all that effort to waste.
When a luxury brand becomes available everywhere, many consumers lose interest in buying it at the original price. This reduces sales for the company. It can confuse other customers because they struggle to tell the difference between fake and original goods. They start wondering if it is worth to spend a lot of money on the brand.
Other Useful Resources
- What is a Stakeholder in Business?
- Definition of Human Rights and their Implication in the Workplace
- Exam Practice Questions | Grade 12
- Grade 12 – Term 2 Notes | Business Studies
- Annual Teaching Plans | Business Studies
- Bounds, M. 2018. Focus Business Studies Grade 12 Learner’s Book. 14th ed. Cape Town: Maskew Miller Longman.
- Chanderdeo, A. 2011. Platinum Business Studies, Grade 10, Learner’s Book. Cape Town: Maskew Miller Longman.
- De Nobrega, C. 2017. Business Studies 10, Study Guide. Pietermaritzburg: Shuter & Shooter.
- Francis, D., & Webster, E. 2019. Poverty and inequality in South Africa: critical reflections. Development Southern Africa, 1-15.
- Overseas Security Advisory Council. 2020. South Africa 2020 Crime & Safety Report. https://www.osac.gov/Content/Report/63e37d80-c040-462d-a868-181c51cf7188 [2020/05/15]
- Pinnock, A. 2012. Business Studies, Grade 10, CAPS. Cape Town: The Answer.
- Webster, D. 2019. Why South Africa is the world’s most unequal society. Mail & Guardian Online. https://mg.co.za/article/2019-11-19-why-sa-is-the-worlds-most-unequal-society/ [2020/05/15]
- Yalnizyan, A. 2011. Inequality is bad for business. Canadian Business. https://www.canadianbusiness.com/business-strategy/inequality-is-bad-for-business/ [2020/05/15]