Analyse the likely opportunities and threats to SA of the forecast economic changes given in Appendix 1.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2017). The mark or mark type is shown in brackets.

1. [K] Opportunities and threats – external factors that impact businesses positively and negatively.
2. [K] Definition of terms from Appendix 1.
3. [APP] In this case predictions suggest that economic growth is slowing and inflation is rising.
4. [APP] The currency of SA's home country is getting stronger against the dollar.
5. [APP] Inflation is set to rise above the rate of economic growth – credit comments about falling ‘real growth’.
6. [APP] With low unemployment could flexible contracts mean more difficulty in recruiting staff?
7. [APP] Impact of changes on willingness of SA to make investments such as purchase of new aircraft.
8. [APP] Linking changes to relatively low profitability of SA.
9. [APP] SA not in position of being able to raise fares, as ‘budget airline’ business model.
10. [APP] Grants and subsidies from government to encourage overseas businesses and visitors may offset impact of economic changes.
11. [AN] Slowing economic growth may lead to incomes for consumers and businesses increasing at a slower rate and this could slow the rate of increase in demand for flights.
12. [AN] Low unemployment could cause rising wage costs and impact SA’s competitiveness.
13. [AN] Businesses such as SA may be less willing to make substantial investments with falling growth of real GDP.
14. [AN] Currency appreciation will lead to fares being higher if bought in Euros and probably other currencies.
15. [AN] Incomes still increasing at a reasonable rate, continued increase in demand for air travel.
16. [AN] SA’s profitability is relatively low and could fall, meaning reliance on loan finance for future investments, interest rates set to rise.