Welcome!
Public Sector Economics and Finance 1 PSF150S
Learner Guide
• Contact details
Name Building Telephone E-mail address Consulting
and room number hours
number
Lecturer: Office 2.76 021 - 460 4212
[email protected] To be confirmed
Mr R Schultz Coop at the start of
Building each term
Head of Department: Office 3.57D 021 – 460 3173
[email protected] Arrange an
Prof HH Ballard Engineering appointment
Building with the
departmental
secretary
Departmental Office 3.57D 021 – 460 3173
[email protected] secretary: Engineering a
Ms D Morrison Building
Public Sector Economics and Finance 1 PSF150S
Learner Guide
• Introduction to subject
- Subject outcomes
- SAQA Credits
- Approaches used in the classroom to
help you learn effectively
- CPUT attributes
Public Sector Economics and Finance 1 PSF150S
Learner Guide
• Study materials
Prescribed text book:
Moeti, K. (ed.). 2014. Public Finance
Fundamentals. 2nd ed. Claremont: Juta & Co
Ltd.
Mohr, P & Associates. 2015. Economics for
South African students. Pretoria: Van Schaik
Publishers.
Mr. Robert Schultz |
[email protected] Public Sector Economics and Finance 1 PSF150S
Learner Guide
• Assessment structure and weightings
TERM ASSESSMENT WEIGHTING DESCRIPTION
1 Class test (at the end of term) 15% In class test on work covered
during the term
2 Individual assignment 15% Topic to be advised
2 Examination 20% Part of June examination: work
covered during first semester
3 Class test (at the end of term) 15% In class test on work covered
during the term
4 Group assignment/presentation 15% Topic to be advised
4 Examination 20% Part of November examination:
work covered during second
semester
Public Sector Economics and Finance 1 PSF150S
Learner Guide
• Graphic presentation of the subject
units 5 The
relationshi
p between
the
governme
nt sector
and the
economy
4 Reforms
to SA 1 Public
public money and
financial governmen
managem Subject: t
ent Public
Sector
Economics
and Finance
1
2 The
3
relationshi
Intergover
p between
nmental
accountin
fiscal
g and
relations
finance
Public Sector Economics and Finance 1 PSF150S
Section 1: Chapter 1
DEFINING MONEY
- Money defined
- Public money
- Public interest
- Public benefit
Public Sector Economics and Finance 1 PSF150S
Money defined-
money, a commodity accepted by general consent as a medium of economic exchange. It is the medium in
which prices and values are expressed; as currency, it circulates anonymously from person to person and
country to country, thus facilitating trade, and it is the principal measure of wealth.
Example: Fiat money is currency that is not backed by a commodity or physical good but derives its value
from the strength of the issuing authority (usually a government).
Examples: Paper banknotes and coins (metallic money) are common forms of fiat money. These are widely
accepted for transactions and represent the value assigned by the government1.
Public money- Public money is money that has been collected by the state, usually through
taxation. It includes all moneys belonging to, received by, or held by, the state, or any city, county, town,
district, or public agency therein, or by an officer thereof acting in his or her official capacity. Public money
also means any money received, collected by, or due a public official under color of office, as well as any
money collected by any individual on behalf of a public office or as a purported representative or agent of
the public office.
Public Intereset
In social science and economics, public interest refers to the welfare or well-being of the general public and
society. It encompasses considerations that affect the good order and functioning of the community and
government affairs, particularly when they impact public property, health, safety, or the general welfare. The
concept of public interest is deeply rooted in democratic theories of government and is often paired with two
other related concepts: convenience and necessity.
A public benefit- means a positive effect or reduction of negative effect on one or
more aspects of the public interest.
• A public benefit can be provided by a government or a private entity, and can have various
forms, such as enhanced mobility, environmental protection, economic development, public
safety, or capital availability.
• A public benefit is usually intended to create or retain employment opportunities, stabilize or
increase the tax base, or support the redevelopment of facilities
Section 1: Chapter 1
DEFINING MONEY
- Class activity:
o Individually write a paragraph on your understanding of
the following topic: “Where does government get
their money from”
o Allow 15 minutes for the writing of the paragraph
o Your response to be read in class by a fellow student
Public Sector Economics and Finance 1 PSF150S
Section 1: Chapter 1
DEFINING MONEY
Reflection on
the
chapter/sectio
n
Public Sector Economics and Finance 1 PSF150S
Section 1: Chapter 2
MONETARY POLICY AND FISCAL POLICY
- Monetary
policy
- Fiscal
policy
Public Sector Economics and Finance 1 PSF150S
Monetary policy refers to the strategies and actions taken by a nation’s central bank to
control the overall money supply within the economy. These policies aim to achieve specific economic
goals, such as promoting growth, managing inflation, and influencing employment levels. Let’s delve into
the details:
Tools and Strategies:
Interest Rates: The central bank can adjust interest rates charged to banks for
borrowing money. Changes in interest rates impact consumer spending, business
investment, and overall economic activity.
Reserve Requirements: The central bank can alter the amount of cash
that banks are required to hold as reserves. Adjusting these requirements affects the
money supply.
Open Market Operations: The central bank can buy or sell government
bonds in the open market. These transactions impact the money supply and interest rates.
Types of Monetary Policy:
Expansionary Monetary Policy: Used during economic slowdowns or recessions, it
involves lowering interest rates to encourage borrowing and spending.
Contractionary Monetary Policy: Implemented to control inflation, it raises interest
rates and limits the money supply.
Fiscal policy refers to the use of government spending and tax policies to influence
economic conditions, especially macroeconomic conditions. It plays a crucial role in managing
the overall health of an economy
Expansionary Fiscal Policy:
During a recession, governments can implement an expansionary fiscal policy.
This involves lowering tax rates or increasing government spending to encourage demand and
spur economic activity.
The goal is to boost aggregate demand and fuel economic growth.
Contractionary Fiscal Policy:
To combat inflation, governments can use a contractionary fiscal policy.
This policy involves raising tax rates or cutting government spending to prevent or reduce
inflation.
The aim is to cool down an overheated economy.
Section 1: Chapter 2
MONETARY POLICY AND FISCAL POLICY
Public Sector Economics and Finance 1 PSF150S
Section 1: Chapter 2
MONETARY POLICY AND FISCAL POLICY
- Class activity:
o In your own words, do you think that government has a
direct influence in your personal finances? Explain your
answer in 150 words.
o Allow 20 minutes for the writing of the paragraph
o Your response to be read in class by a fellow student
Public Sector Economics and Finance 1 PSF150S
Section 1: Chapter 2
MONETARY POLICY AND FISCAL POLICY
Reflection on
the
chapter/sectio
n
Public Sector Economics and Finance 1 PSF150S
Section 1: Chapter 3
PUBLIC PROVISION OF GOODS AND
SERVICES, AND KEY SOURCES OF
GOVERNMENT REVENUE
- Rational for state to provide goods and
services
Public Sector Economics and Finance 1 PSF150S
Public provision of goods and services -refers to the provision of
certain goods and services by the government.
• These goods and services are financed through the budget and can be used without any direct
payment.
• Public goods are commodities or services that are made available to all members of society and are
typically administered by governments and paid for collectively through taxation.
• Examples of public goods include law enforcement, national defense, and the rule of law.
• . Here are some key categories of public provision:
• Community Goods:
• Examples: Defense, street lighting, and flood control.
• Characteristics:
• Indivisibility: They cannot be divided according to individual preferences.
• Non-excludability: It’s challenging to exclude “free-riders” who benefit without contributing.
• Examples include public parks, museums, and motorways.
1.Collective Goods:
1. These are also indivisible but can exclude free-riders through fees or tolls.
2. Examples: Parks, museums, and bridges.
3. Usually provided free due to high collection costs and non-rivalry (use by one
person doesn’t affect others).
2.Merit Goods:
1. These are provided to ensure adequate consumption for the well-being of
society.
2. Examples: Education and health care.
3. Sometimes offered without direct charges (e.g., vaccinations).
Internalization of Externalities:
The government intervenes to address widespread external effects.
Examples: Urban renewal or large-scale projects like Airbus development.
Section 1: Chapter 3
PUBLIC PROVISION OF GOODS AND
SERVICES, AND KEY SOURCES OF
GOVERNMENT REVENUE
- Classification of services provided by
government
o Community services
o Order and protection
o Social welfare
Economic welfare
Public Sector Economics and Finance 1 PSF150S
Section 1: Chapter 3
PUBLIC PROVISION OF GOODS AND
SERVICES, AND KEY SOURCES OF
GOVERNMENT REVENUE
- Sources of government revenue
o Taxes and taxation
o Fundamental principles of taxation
Public Sector Economics and Finance 1 PSF150S
Section 1: Chapter 3
PUBLIC PROVISION OF GOODS AND
SERVICES, AND KEY SOURCES OF
GOVERNMENT REVENUE
- Classification of taxes
o Direct taxes
o Indirect taxes
o Types of tax
Mr. Robert Schultz | [email protected]
Public Sector Economics and Finance 1 PSF150S
Direct tax -is a tax that an individual or organization pays directly to the entity that imposed it.
Examples of direct taxes include:
Income tax: A tax levied on an individual’s earnings, profits, or income.
Real property tax: A tax on the value of land and buildings (real estate).
Personal property tax: A tax on movable assets such as vehicles, boats, or machinery.
Taxes on assets: These include taxes on investments, wealth, or other assets held by
individuals or businesses.
Indirect tax is a tax levied on goods and services rather than on income or profits.
Unlike direct taxes, which are paid by the person the government seeks to tax, indirect taxes are
collected by one entity in the supply chain (such as a manufacturer or retailer) and then passed on
to the consumer as part of the purchase price of a good or service. E.g. Indirect taxes are taxes that
can be passed on to another person.
In South Africa, there are several types of taxes that
individuals and businesses encounter. Let’s explore
them:
Income Tax: This tax is levied on the income earned by
individuals and companies. It includes personal income
tax for individuals and corporate income tax for
businesses.
Value Added Tax (VAT): VAT is a consumption tax
applied to most goods and services. It’s collected at
each stage of production or distribution, and consumers
ultimately bear the cost.
PAYE (Pay As You Earn): Employers deduct PAYE from
employees’ salaries and remit it to the tax authorities. It
ensures that income tax is paid throughout the year.
Customs and Excise Taxes: These taxes apply to
Section 1: Chapter 3
PUBLIC PROVISION OF GOODS AND
SERVICES, AND KEY SOURCES OF
GOVERNMENT REVENUE
- Income tax
Public Sector Economics and Finance 1 PSF150S
Section 1: Chapter 3
PUBLIC PROVISION OF GOODS AND
SERVICES, AND KEY SOURCES OF
GOVERNMENT REVENUE
- Consumption tax
o Value-added tax o Nominal levies
o Excise duty o Consumer tariffs
o Import duties o Sundry charges
o Property tax o Bilateral and
o User charges multilateral aid
o Donor agencies
Mr. Robert Schultz | [email protected]
Public Sector Economics and Finance 1 PSF150S
Section 1: Chapter 3
PUBLIC PROVISION OF GOODS AND
SERVICES, AND KEY SOURCES OF
GOVERNMENT REVENUE
- Class activity:
o Individually list at least three examples of each of the
services provided by government
o Allow 10 – 15 minutes
Public Sector Economics and Finance 1 PSF150S
Section 1: Chapter 3
PUBLIC PROVISION OF GOODS AND
SERVICES, AND KEY SOURCES OF
GOVERNMENT REVENUE
Reflection on
the
chapter/secti
on
Public Sector Economics and Finance 1 PSF150S
Section 1: Chapter 4
ROLE PLAYERS IN PUBLIC FINANCIAL
MANAGEMENT
- Public financial management
o Managing resource scarcity
o Dealing with efficiency, effectiveness and economy
o Managing the budget
o Providing financial advice
o Monitoring and controlling activities
Public Sector Economics and Finance 1 PSF150S
Section 1: Chapter 4
ROLE PLAYERS IN PUBLIC FINANCIAL
MANAGEMENT
- Role players
o The legislature and public financial management
o The Public Accounts Committee
o The Auditor General
o The Public Protector
Public Sector Economics and Finance 1 PSF150S
Section 1: Chapter 4
ROLE PLAYERS IN PUBLIC FINANCIAL
MANAGEMENT
- The executive authority and public
financial management
o The President
o The Cabinet
o The Minister of Finance
Public Sector Economics and Finance 1 PSF150S
The President
The current President of South Africa is Cyril Ramaphosa. He has been in office since February 15,
201812. President Ramaphosa is a former anti-apartheid activist, trade union leader, and businessman.
In addition to his role as President, he is also the president of the African National Congress (ANC) 2.
His administration focuses on economic growth, job creation, poverty reduction, and restoring the
integrity of public institutions. Despite the challenges posed by the global pandemic, President
Ramaphosa continues to work towards building a sustainable and prosperous country for the future.
The Cabinet
The Cabinet of South Africa is the most senior level of the executive branch of the Government of South
Africa. It is made up of the president, the deputy president, and the ministers.
The Minister of Finance
The Minister of Finance in South Africa is Mr. Enoch Godongwana. He assumed office on August 5,
2021. Mr. Godongwana is a member of the National Executive Committee of the African National
Congress (ANC). His responsibilities include financial management of government affairs, budget
formulation, and economic policy development in collaboration with the ministers of Economic
Development and Trade and Industry. Additionally, he oversees the South African Revenue Service
Section 1: Chapter 4
ROLE PLAYERS IN PUBLIC FINANCIAL
MANAGEMENT
- The administrative authority and public
financial management
Public Sector Economics and Finance 1 PSF150S
Public financial management-
is a critical aspect of governance, ensuring that public funds are managed efficiently and effectively. Let’s
delve into some key concepts related to this topic:
Delegations of Authority:
Delegations refer to the transfer of powers and responsibilities from higher authorities to lower levels within
an organization.
In the context of public administration and financial management, delegations are authorized and exercised
in terms of relevant legislation.
The Principles of Public Administration and Financial Management Delegations
provide guidance on how delegations should be developed and implemented.
Legal Framework:
The Public Finance Management Act (PFMA)- is a crucial piece of legislation in South Africa.
Its purpose is to regulate financial management in the national and provincial governments.
The PFMA ensures efficient management of revenue, expenditure, assets, and liabilities.
It outlines the responsibilities of individuals entrusted with financial management.
Roles and Responsibilities:
Executive Authorities (such as ministers) play a key role in financial management.
They authorize delegations, assign functions, and oversee financial processes.
Heads of Departments are responsible for implementing financial policies and managing resources.
Deputy Ministers also contribute to decision-making and oversight
Section 1: Chapter
ROLE PLAYERS IN PUBLIC FINANCIAL
4
MANAGEMENT
- The Reserve Bank and public financial
management
Public Sector Economics and Finance 1 PSF150S
South African Reserve Bank (SARB):
The SARB is the central bank of South Africa.
Its primary mandate, as stated in Section 224 of the Constitution, is to protect the value of
the currency in the interest of balanced and sustainable economic growth in the Republic .
The SARB plays a crucial role in the country’s monetary policy, financial stability, and
overall economic well-being.
Public Financial Management (PFM):
PFM refers to a set of rules, institutions, policies, and processes that govern the use of
public funds across all sectors.
Key components of the annual budget cycle include:
Budget Formulation: Creating the national budget.
Budget Execution: Implementing the budget.
Accounting and Reporting: Ensuring transparency and accountability.
External Security and Audit: Ensuring proper financial controls and oversight 2.
Section 1: Chapter 4
ROLE PLAYERS IN PUBLIC FINANCIAL
MANAGEMENT
- Class activity:
o In your own words, explain the impact that an 5%
increase in the current repo rate, will have on the
personal finances of a person working for government
that utilizes more than 50% of his/her monthly salary to
pay for debt.
o Allow 20 minutes for the writing of the paragraph
o Your response to be read in class by a fellow student
Public Sector Economics and Finance 1 PSF150S
Section 1: Chapter 4
ROLE PLAYERS IN PUBLIC FINANCIAL
MANAGEMENT
Reflection on
the
chapter/sectio
n
Public Sector Economics and Finance 1 PSF150S
